SIAM Relieved At New Cess Rates

The Society of Indian Automobile Manufacturers (SIAM) has expressed relief that a Goods and Service Tax (GST) cess of 25 per cent has not been imposed across the board on all larger cars, as was the apprehension. With the new GST cess, the taxation on mid-sized passenger cars has been almost restored to the pre-GST levels, while taxes on luxury cars and SUVS have been slightly moderated as compared to the pre-GST rates. SIAM says now there are a few more slabs of taxes on the auto industry as compared to the erstwhile excise duty structure.

According to the GST Council decision, the 15 per cent cess in addition to the 28 per cent GST on SUVs will be increased by 7 per cent, on luxury cars by 5 per cent and on mid-sized cars by 2 per cent. So, cars in each category will bow be priced higher according to the additional cess in each category.

SIAM also welcomes the differential taxation on hybrid cars, saying that the government has also recognised the need to encourage hybrid vehicles. However, SIAM feels that the long standing anomaly in the taxation of 10-13 seater vehicles could have been fully corrected and these should have been fixed at a GST rate of 28 per cent without any cess as these are public transport vehicles and not for personal use. SIAM hopes that this anomaly would be addressed in future, and welcomed the government's deadline of 2030 to move to electric vehicles.

"I think targets and ambitions should always be high. And we've been told and given a very ambitious target, you can debate whether you can go 100 per cent electric, but the direction is very clear, even if we end up going about 30-40 per cent electric. The direction is that we have to move to electric as soon as possible. I look at it more as a direction than an end date, like 2030. Obviously, it can't be an end date, other countries are saying they will do it by 2040, like France. It is a process, and we're starting that process very seriously."

SIAM however cautioned that framing policy should be consistent and clear and the government should focus on a practical approach, and not change guidelines frequently.

"What we need to see is a long term policy, a long term policy that doesn't change every two years. Now, the FAME scheme was announced in 2015, after two years, we want to make changes to that policy, and we don't know what the changes to that policy are. If those changes are too disruptive, that means there's no long term policy. What we need to see is a long term policy, because investments are to be made by the industry, and those investments need to be recovered as well, because you need return on investment. So, industry will plan when a long term policy is shared. That's all we ask for. I also understand that in a field where technology is evolving very rapidly, it may be difficult to have a long term plan," said Vishnu Mathur, Secretary General, Society of Indian Automobile Manufacturers Association (SIAM).

SIAM also hopes that states will not unilaterally increase road tazes as now they would be receiving increased compensation through the revised cess. The association of auto makers feel that the effects of demonetisation has started to wane now, and overall market sentiment is good, and rural markets have also started bouncing back, on the back of a good monsoon, and increase in disposable income. SIAM hopes that the new cess rates will now remain stable and will not be increased frequently.