Automakers such as Toyota, Mercedes-Benz, Audi, JLR and Mahindra & Mahindra plan to pass on to consumers the increase in cess of 5-7 per cent on big cars and SUVs following the GST Council's decision on Saturday.
Luxury carmakers said the constant changes in rates could lead to market instability and affect demand growth trends, expressing disappointment over the move. However, some of them heaved a sigh of relief as the hike in the cess was kept below the 10 to 25 per cent range which was within the GST Council's powers.
Mercedes-Benz India MD and CEO Roland Folger said: "With this increase in cess now, the prices are bound to leap back to the pre-GST regime, in some cases higher than the pre-GST regime, thus negating altogether the benefits of GST regime." "The decision to increase the cess yet again is very unfortunate and totally overlooks the contribution we make to the industry and the economy," he claimed.
Though the luxury car industry's volume contribution is very low, the value-wise share is much higher and that has immense potential to grow even more in future if there is fair taxation, he added. "We note the increase in the cess from 2-7 per cent on mid, large- sized cars and SUVs. We see the prices of our products going up proportionately, which may nearly reflect the pre-GST scenario. However, we are ascertaining the real price impact on our models, given the cess hike,'' Toyota Kirloskar Motor vicechairman and whole-time director Shekar Viswanathan said in a statement.
These constant changes could lead to market instability and thus dampen the spirits of the industry across the entire value chain, Viswanathan added.
Mahindra and Mahindra MD Pawan Goenka said: "We are awaiting the exact definition of the categories. Whatever is the impact of the increased cess will reflect in the revised pricing from the effective date."
Goenka also said, "We are grateful that the Council has very thoughtfully not raised the cess to the maximum level that had been enabled by the ordinance."
According to BMW Group India President Vikram Pawah, while the company welcomes the implementation of the GST in India, immediate changes and increase of motor vehicles cess adversely affect stability and growth of the automotive industry in India.
Reacting to the hike in cess, Audi India Head Rahil Ansari said: The prices will go up again, which is disappointing. We will need to study the impact of this hike on the buyer sentiment.
He further said the taxes on the auto industry are already very high and we expected the unfulfilled potential of this segment to increase after the implementation of GST and rationalisation of taxes. Jaguar Land Rover India President and MD Rohit Suri said, "While the increase in cess will impact consumer demand, investment and job creation, we are glad that the government and the GST Council took note of our concerns and somewhat moderated the increase in cess."
Under the new rates, popular mid-sized cars like Honda City, Maruti Suzuki Ciaz petrol and the newly launched Hyundai Verna will see price increase by 2 per cent. Similarly, luxury cars such as BMW 3, 5 and 7 series, Audi A3, A4, A6 and A8 along with Mercedes C Class, E Class and S Class will now get more expensive by 5 per cent.
SUVs, starting from Scorpio and XUV500 from the stable of Mahindra and Mahindra, Renault Duster, Toyota Fortuner to luxury ones like Land Rover Discovery, Audi Q3, Q5 and Q7, BMW X3 and X5, along with Mercedes GLA, GLC and GLS will all see prices going up by 7 per cent. In the earlier approved rates, large cars with engine greater than 1,500 cc and SUVs with length more than 4 metres and engine greater than 1,500 cc attracted a cess of 15 per cent.