Hyundai hits out at changing tax rates, says it will affect investment

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 4,000 mm 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.