Increase in Cess Rate To Impact Sales By Double-Digit Reduction: Audi India Head

Owing to Union Cabinet’s nod to hike additional tax on luxury cars and sports utility vehicles (SUVs), Rahil Ansari, Head, Audi India said the step “is bound to adversely impact sales by possibly a double-digit reduction and will consequently reduce revenues for the company, dealers and perhaps also tax revenues for the government.”

In an official statement, Ansari said, “While the overall impact will still have to be evaluated in some time, we will be forced to redraw our plans for the Indian market based on future projections in this scenario.”

“The taxes on this industry are already very high and this increase in cess rate will be detrimental to the luxury car industry as we will be forced to hike our prices to levels higher than pre-GST period.”

The Union Cabinet chaired by Prime Minister Narendra Modi, on Wednesday (30 August), has given its approval to the proposal of the Finance Ministry to promulgate an ordinance to suitably amend the Goods and Services Tax (Compensation to States) Act, 2017.

The approval would allow to increase the maximum rate at which the Compensation Cess can be levied from 15 per cent to 25 per cent on luxury and large vehicles.

The issue regarding the increase in effective rate of Compensation Cess on motor vehicles will be examined by the GST Council in due course.

The luxury car industry in India, while small in volumes, still contributes over 10 percent in value. While the segment definitely needs more positive initiatives from the government to be able to deliver a bigger contribution to the Indian economy, this scenario is clearly a setback.

Ansari added, “We request the GST Council to carefully evaluate the negative impact on this and, if a decision is taken on a 10 per cent cess increase, postpone the implementation for another 6-12 months to evaluate the real impact of the GST on the automobile sector, in particular the luxury segment.”

“This will surely prove that the overall effect with a lower cess percentage of 15 per cent is generating higher tax revenues than expected.”