The government’s move to increase the ceiling on the additional cess on automobiles from 15 per cent to 25 per cent on larger cars and SUVs, is a big disappointment, said Yoichiro Ueno, President & CEO of Honda Cars India Ltd (HCIL).
He said that 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. Currently, large cars and SUVs attract a GST rate of 28 per cent with a cess of 15 per cent. However, earlier this month the GST Council approved a proposal to hike cess on them to 25 per cent.
Too much 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 trend, 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 lot of models which are classified as entry segments in other countries are regarded as luxury models in India just because it is over four meters in length, he added.
As for the high level of taxation on hybrid vehicles, Ueno said that the government must re-consider it, as they are advanced and environment friendly automobiles. Ueno said that such a high tax number will pose a fresh challenge to the company’s intention to popularize this environment friendly technology in India.
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 the infrastructure is ready,” he said.