Mercedes Benz slams hike in cess

These 10-13 seater vehicles including ambulances now attract top tax rate of 28 per cent with 15 per cent cess

The GST Council announced a hike in cess on mid-sized cars by 2 per cent, taking the effective GST rate to 45 per cent while the cess on large cars has been hiked by 5 per cent taking total GST rate to 48 per cent.

"However, by continuous taxation of the segment, the overall revenue generation is going to be hurt, as the increase in price is going to hurt demand", said Mr Folger. Earlier government had notified of hiking the cess rates from 15% to 25% which could have impacted the demand for the mid and large sized cars.

Consequent to the GST Council's decision, the cess on mid-segment cars has been increased by two per cent, for large segment cars it has been increased by five per cent and for SUVs by seven per cent. However, the cess on small petrol and diesel cars, hybrid cars and those carrying up to 13 passengers has not been raised.

In its meeting held on 9th September, the GST Council has revised the tax rate for SUVs and Luxury cars to 50%. This will be be added to the 15% cess charged on such vehicles over and above the GST of 28%. Under the GST regime, cars attract the highest tax slab of 28% and on top of that a cess is levied.

According to BMW Group India President Vikram Pawah, while the company welcomes the implementation of the Goods and Service Tax (GST) in India, immediate changes and increase of motor vehicles cess adversely affect stability and growth of the automotive industry in India.

The Nifty Auto index was trading at 10,867.25 level, up by 88.25 points or 0.82% as at 1125 hours on Monday.

While automobile companies expect this change in the GST rate to have a negative impact on the vehicle sales, the impact may be limited. Industry had passed on the reduction in tax incidence and cut prices especially on large cars and SUVs. The government has left small cars, electrics and hybrids unaffected for they occupy a major share in the automobiles sold in the country.

Reacting to the hike in cess, Audi India Head Rahil Ansari said: "Even if the rumoured cess hike of 10 per cent was not concluded, the prices will go up again, which is disappointing".

The rate revision in these 40 items followed a review by the fitment committee found anomalies in the GST levied in these products.

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