KOCHI: The state government’s political decision to increase tax on luxury cars and buildings will take a beating on the sectors, feels industry.
As the state accounts for about 10 per cent of India’s luxury car sale, the Cabinet decision on Wednesday to hike the tax of cars valued over `20 lakh from 15 per cent to 20 per cent will be a blow to the segment.
Real estate sector as a whole is not happy with the announcement to impose more tax on flats above 2,000 sqft as the stakeholders feel that an average buyer purchases flats with this much area. The decision to increase the tax rate on premium cars came at a time when the industry as a whole registers an increase of four per cent in sales. “The decision to increase tax rate on cars and flats will not do any good for the economy of the state. Automobile sector is going through tough times now and such decisions will only produce negativity in the segment.
The industry is slowly coming out of the recessionary phase. The decision to hike tax rate will only prove to be a dampener,” said John Paul, managing director, Popular Automobiles. In Kerala, the luxury car sales account for 32 per cent of the overall sales.
“The latest government decision will affect the growth of automobile industry. Normally year-end sales happen during October, November, December every year. This decision may impact the sales as well,” said Eldo Benjamin, vice-president of Toyota Motors. He pointed out that owing to the increased tax rate there may be movement for the premium used car market.
Comparing a 2,000-sqft flat owner with a 3,000 sqft house occupant is not fair as the former is only a middle class buyer, said V Sunilkumar, managing director of Asset Homes.
“The increase in tax of flats over 2,000 sqft is the latest in the series of decisions taken by the state government to kill the apartment sector in the state. In September first week, the VAT on flats was raised by one per cent to four. The water tariff hike will mainly affect the flat owners as a water connection to a flat is considered as single,” he said.
John Thomas, president, Credai-Kochi said that as the industry slowly comes out of recession these kinds of decision by the government will not do any good for the sector.