New Delhi: Hyundai Motor India (HMIL) on Tuesday hit out at the frequent changes in tax rates on automobiles saying investment for new products and technology will be adversely impacted in the absence of consistent and long term policy.
The GST Council last week decided to hike cess on mid- size cars by 2 per cent, on large cars by 5 per cent and on SUVs by 7 per cent to bring tax rates on these cars at pre-GST levels.
"Implementation of GST was to create single unified large market with simplified tax structure for auto industry.
However, the recent rolling back to multiple rates with pre GST classification has come as a set back to industry, shaking the confidence of auto manufacturers," HMIL said in a statement.
The company, which is the second largest car manufacturer in the country after Maruti Suzuki India, expects the decision to hike cess will impact sales during the festive season.
"We expect the coming festive season will witness low customer sentiment on new purchase decision," it said.
Further, in the absence of consistent and long term policy the investment for new products and new technology will be adversely impacted, it added.
With the government notifying levy of increased cess, the effective GST rate on mid-size cars will be 45 per cent, and on large cars it will be 48 per cent.
The rate will be 50 per cent on sports utility vehicles (SUVs), which include cars with length exceeding 4,000mm and having a ground clearance of 170mm and above.
However, the cess on small petrol and diesel cars, hybrid cars and those carrying up to 13 passengers has not been raised.
Under the GST regime, cars attract the highest tax slab of 28 per cent and on top of that a cess is levied.
Automakers such as Mahindra & Mahindra, Toyota Kirloskar Motor, Audi, Mercedes-Benz and JLR India have already announced plans to raise prices due to hike in cess.
Meanwhile, the government has notified levy of increased GST cess of up to 7 per cent on mid-size, large and SUV cars.
The GST Council on September 9 had decided to hike cess on mid-size cars by 2 per cent, on large cars by 5 per cent and on SUVs by 7 per cent to bring tax rates on these cars at pre-GST levels.
The Finance Ministry late last night notified the hike in quantum of cess to be levied on cars, following which the new rates came into effect.
The effective GST rate on mid-size cars will be 45 per cent, and on large cars it would be 48 per cent.
The rate will be 50 per cent on sports utility vehicles (SUVs), which include cars with length exceeding 4,000mm and having a ground clearance of 170mm and above. Car prices had dropped by up to Rs 3 lakh as the tax rates fixed under the Goods and Services Tax (GST) that came into effect from July 1, was lower than the combined central and state taxes in the pre-GST days.
To fix this anomaly, the council raised the cess.
The Finance Ministry now has amended the notification 'Compensation Cess (Rate)', dated the June 28, 2017, and brought in the changes in the rate of cess to be levied.
However, cess on small petrol and diesel cars, hybrid cars and those carrying up to 13 passengers has not been raised.
Under the GST regime, cars attract the highest tax slab of 28 per cent and on top of that a cess is levied.
An ordinance was promulgated last week to hike the cess from 15 per cent to up to 25 per cent. The Council then on September 9 decided on the quantum of hike in cess in various segments.