Mercedes-Benz India has
categorically stated that the decision of the Goods and Services Tax Council to
raise the cess on luxury cars from the current level of 15pc to 25pc will be a
strong deterrent to the growth of luxury cars in the country and will reverse the
positive momentum that the industry wanted to achieve post the introduction of
Small petrol cars of 4 metres
length and upto 1200cc engine caqpacity attract a 1pc cess while diesel cars of
similar length and upto 1500cc engine capacity attract a 3pc cess. Mid-size
cars and large cars or SUVs attract a cess of 15pc which in essence resulted in
a reduction in levies on some models under the new GST regime. Now all that
will change post the revision of cess for large vehicles.
Commenting on the new
amendment in the GST Law, Roland Folger, MD & CEO, Mercedes-Benz India stated
that, "We are highly disappointed with the decision. We believe this will
be a strong deterrent to the growth of luxury cars in this country. As a
leading luxury car maker, this will also affect our future plans of expansion
under 'Make in India' initiative, which aims at making and selling world-class
products in India, with the latest technology for end consumers.
“We feel deprived as the
leading manufacturer of luxury cars in India, who has been championing ‘Make in
India’. This decision will also reverse the positive momentum that the industry
wanted to achieve with the introduction of GST. With this hike in cess, we
expect the volumes of the luxury industry to decelerate, thus offsetting any
growth in the potential revenue generation, that could have come with the
estimated volume growth."
Folger further noted that this
latest government decision once again reiterates the need for a long-term
roadmap for the luxury car industry, which has been at the receiving end of
arbitrary policies. “The constant shift in policy makes our long-term planning
for the market highly risky, and we think this would only have an adverse
impact on the country's financial ratings. By making better technology more
expensive, the Government is causing more damage to the environment and slowing
down the overall growth pace of the country's economic growth, which it is
striving to achieve," he said.
Folger further added, "One of the
original benefits expected out of GST was rationalisation of tax rates. Luxury
cars and SUVs are one of the segments that long required tax rationalization,
as this segment remains highly taxed. Further, in the pre-GST regime, the taxes
to the final customer were varying widely from state to state depending on the
VAT applicable in respective states. Also, one month is too short a period to
consider an upward revision in rates. The market performance should have been
watched for at least 6 months, before it was relooked. The current proposal of
increase in css clubbed with the increased road tax rates, will take the
effective consumer price much above the pre GST scenario level."
Meanwhile Shrikant Akolkar (Research Analyst-
Automobiles, Angel Broking) in a statement said, “The likely hike in the cess
rate from current 15% to 25% is not expected to see a materially negative
impact on the demand for the premium automobiles. The underlying demand remains
healthy which is the driving force for the automobile sector. We believe that
companies will be able to pass on the cess hikes on luxury vehicle s/UVs to
customers by price revision.”
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