Automakers and experts are in the process of evaluating the details of the announcement and are figuring out as how would the new tax regime affect their businesses
While the goods and services tax on cars are expected to remain under 28%, it would be around 40% on luxury cars.
Automakers and experts are in the process of evaluating the details of the announcement and are figuring out as how would the new tax regime affect their businesses.
Hyundai, Skoda, Maruti Suzuki among other automakers who were approached for comments said that they are still going through the details and will be able to comment later.
Roland Folger, managing director & CEO, Mercedes-Benz India, said that the luxury cars are highly taxed in India and that remains an impediment to a large extent for the industry's growth.
"This decision is quite discouraging for the luxury car industry, as the luxury car manufacturers not only introduces advanced technology for consumers, especially in the areas of safety systems in cars, which still remains a major concern for everyone; but also remains a key provider of jobs and income on a large scale. The levying of additional cess will defeat the very purpose of introducing GST, wherein all taxes are supposed to be subsumed into GST rate."
Pawan Goenka, executive director at Mahindra & Mahindra, told a television channel that he is surprised that the small cars may fall under 28 %. "If small cars fall in 28% slab it will not lead to any price reduction," he said. The industry was expecting a lower rate of 18% rate.
At present, the small cars – those below 4 metres length – attract 28% taxes, while the mid-sized are charged about 39%. The larger cars have an effective collective duty rate of about 48-50%.
The Society of India Automobile Manufacturers (SIAM) had during the stakeholders comments suggested two slabs for the industry with a standard rate be applicable on small cars, MUVs, two-wheelers, three-wheelers and commercial vehicles. Secondly, cars other than small cars should attract a GST rate that is 8% more than the standard rate. Similarly, the GST rate for electric vehicles, hybrid electric vehicles and other alternative fuel vehicles should be at least 8% less than the standard rate.
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