The move to hike ceiling of cess on large cars and SUVs to 25 percent under the new GST regime would impact the growth of advanced global models in India and could come in the way of the country becoming a global hub for automobile production, according to Japanese auto major Honda. The company, which operates in the country through a wholly-owned arm Honda Cars India Ltd (HCIL), said the move is a "big disappointment" and it will "isolate India as a market with too much bias towards small cars".
HCIL President and CEO Yoichiro Ueno said the company had 'sincerely welcomed' the tax reform achieved through GST implementation from July 1 with a confidence that it would be a big boost for the automobile industry in India.
"However, the latest government move to increase the ceiling on the additional cess on automobiles from 15 percent to 25 percent on larger cars and SUVs, is a big disappointment," he said in a statement. Ueno further said: "Such a move will impact the growth of advanced global models in India and will isolate India as a market with too much bias towards small cars."
Currently, large cars and SUVs attract top GST rate of 28 percent with a cess of 15 percent. However, earlier this month the GST Council approved a proposal to hike cess on them to 25 percent. The Indian automobile industry is moving towards globalisation in emission norms and safety standards. But too much focus on small cars and the tax benefits to small cars will isolate India from the global automobile trends, he added.
"If vehicles produced in India are very different from global trend, it will also impact the development of the Indian automobile industry. It makes the export of both CBU vehicles and auto components more difficult and poses hurdles to India in the way of becoming a global hub for automobile production," Ueno said. A lot of models which are classified as entry segments in other countries are regarded as luxury models in India just because it is over four meters in length, he added.
Ueno also asked the government to reconsider the high level of taxation on hybrid vehicles saying these are advanced and environment-friendly automobiles.
"As per the new tax structure, hybrid vehicles will be taxed as per the conventional engine models. This will pose a fresh challenge to our intention to popularize this environment-friendly technology in India," he said.
While the government has announced its commitment to electric vehicle (EV) technology and also extended it the tax benefit under GST, its implementation will require significant infrastructure development over the next decade or so, Ueno added. "We feel that support to HEV (hybrid electric vehicles) will make HEV more attractive to customers and prepare them for adopting EV technology till infrastructure is ready," he said.
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