The recent move by the GST Council to impose additional cess on large cars and SUVs from 15 percent to 25 percent has come in for considerable flak from the automotive industry, particularly from manufacturers of luxury cars and SUVs which were the major beneficiaries of the reduced taxation from July 1.
Now Japanese automaker Honda says the move to hike GST cess would impact growth of advanced global models in India and could come in the way of the country becoming a global hub for automobile production.
As per a PTI report, Yoichiro Ueno, president and CEO, Honda Cars India, 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," Ueno said in a statement.
Ueno added, "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."
While the Indian automobile industry is moving towards globalisation in emission norms and safety standards, too much of a 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 trends, it will also impact the development of the Indian automobile industry. It makes export of both CBU vehicles and auto components more difficult and poses hurdles to India in the way of becoming global hub for automobile production," Ueno said.
A number of models which are classified as entry segment models in other countries are considered luxury models in India just because they are over four metres long, he added.
Honda asks government to reconsider GST on hybrids
Ueno also asked the government to reconsider the high level of taxation on hybrid vehicles, saying they 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 popularise this environment-friendly technology in India," he said.
While the government has announced its commitment to electric vehicle (EV) technology and also extended it 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.