Defer hike in GST cess on luxury cars: M&M

New Delhi: Utility vehicle major Mahindra & Mahindra (M&M) on Thursday said the proposed hike in GST cess on SUVs and bigger cars should not be implemented during the festive season.

The company said that the move to raise cess by 10 per cent would have an adverse impact on the auto industry. "My view is that right now we have implemented GST, industry is stabilising, we have grown in past couple of months, festive season is around the corner, we should not touch the rates for time being," M&M Managing Director Pawan Goenka told reporters here.

The government has notified hike in GST cess on a range of cars from mid-size to luxury variants to a maximum of 25 per cent, from the earlier 15 per cent.

However, the quantum of cess hike in each variety of car would be decided by the GST Council, chaired by Union Finance Minister Arun Jaitley and his state counterparts, in its next meeting on September 9.

Speaking on the sidelines of SIAM annual convention, he added that the government should wait for some time to see the results of GST implementation and then decide if hiking the tax is required in certain categories of vehicles.

When asked about the possible impact of increase in cess, Goenka said: "Obviously if prices go up, it will impact the demand.. clearly the volumes will come down."

He added: "It should not be done during the festive period and whatever needs to be done should be done after it."

He said that even though there is no disagreement that luxury items need to be taxed more, 43 per cent is reasonably high indirect tax on an item. Goenka said the difference between luxury and normal car was 6 per cent during pre-GST era. "It was not 10 per cent, so the GST Council should take that into consideration," he said.

He also asked the government to clearly define 'luxury'. "There should be a clear definition and on that basis put cess on luxury and the tax, I think, should be in the order of about 6 per cent," Goenka said.

Referring to government's plan to promote electric vehicles in the country, Goenka said: "What (Union Transport Minister Nitin) Gadkari said is something that is being said in many countries today -- that the future is electric."

"Now regarding diesel and gasoline, it becoming zero is not going to happen in a hurry. The industry size is very large. Electric vehicles cannot ramp up to that size in 10-12 years," Goenka said.

He added that the company has already invested Rs 500 crore on electric vehicle development and has also committed an additional Rs 600 crore for the vertical.

When asked about hybrid cars, Goenka said the industry has asked for a relook at the policy regarding the segment. "I think different policy is required for mild hybrid vehicles and full hybrids. While we are big supporters of electric vehicles, I think the hybrids also need policy support," he said.

Commenting on frequent changes in regulations, he said any sudden change has an impact on the business and that is a concern generally among the industry.