HYDERABAD: With mid-sized cars becoming cheaper, thanks to the GST Council grading car segments differently, car dealers in the city are expecting improved buying sentiment from customers. The GST Council decided at its meeting here on Saturday to levy different tax slabs on cars of different car segments. Abdullah Khan, owner of a car rental service in the city, had been waiting since July to buy his sixth vehicle. He deferred buying a Maruti Suzuki Swift 2017 model after the GST Council clubbed mid-sized and large cars and sports utility vehicles (SUVs) under the luxury cars category for levying GST.
The cess was later increased from 15 to 25 per cent for luxury vehicles, but the clubbing together of different grades of cars meant uniform cess irrespective of the type of car. Only small petrol and diesel cars were kept 3 per cent low post GST, thus having any tax benefit from Pre-GST rates. The GST Council added a 2 per cent cess on mid-segment cars, taking the total tax rate from 43 per cent to 45 per cent, still much lower than the pre-GST rate of 48 per cent. The cess on large cars was hiked by 5 per cent to 20 per cent now and on SUVs by 7 per cent to 22 per cent now.
“The high tax rates did not deter people from buying cars and we had a steady flow of buyers. But those who were on the fringe will now come forward to buy cars,” said P T Choudary of Acer Motors, a Maruti Suzuki dealer in Secunderabad. But it is unwise to levy an extra 10 per cent cess on luxury cars, he said. “The luxury models have sophisticated new technologies which will find their way to small and mid-segment cars later. Auto companies may now scale down their R & D activities to cut costs,” he added.
Sales soar prior to hike
For passenger vehicles there has been a 13.76 per cent rise in sales for the month of August across the country ahead of the hike in cess rates, says the Society of Indian Automobile Manufacturers (Siam).
Big & luxury cars fetch more revenue to govt
Passenger vehicles longer than 4 metres account for 28 to 30 pc of the total sales in India. The segment accounts for 50 to 60 pc turnover of the automobile industry, which means more taxes for the government.