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Hike in GST cess makes cars expensive

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NEW DELHI, Aug 30: The Cabinet today increase the cess on mid-size, large cars and SUVs from 15 per cent to 25 per cent under the new GST regime.

With GST prices of most SUVs were cut between Rs 1.1 lakh and Rs 3 lakh which will increase in cess, the cuts will be reversed.

The GST council, the apex tax rate setting body under the Goods and Services Tax (GST) regime raised the cess with the amedment to the Schedule of section 8 of the GST (Compensation to a State) Act, 2017.

It had approved on August 5 to raise cess on SUVs, mid-sized, large and luxury cars that had become cheaper post GST rollout on July 1.

Under GST, a cess was levied on demerit goods like cars, tobacco, and coal to compensate the loss of revenue.

Cars attract the top tax rate of 28 per cent. On top of this, a cess of 1 to 15 per cent is levied for the creation of the state compensation corpus.

The date for implementing the hike in the upper limit of the cess from 15% to 25% will be decided by the GST Council when it meets in Hyderabad on September 9.

Presently, large motor vehicles, SUVs, mid-segment cars, large cars, hybrid cars and hybrid motor vehicles attract a cess of 15 per cent over the 28 per cent GST rate.

Small petrol cars of less than 4 meters and 1,200 cc attract a cess of 1 per cent, while small diesel cars of less than 4 meters and 1,500 cc engine attract a cess of 3 percent.

GST Scenario 

GST present slab and upcoming slab rate on cars:-

Existing GST Rates Rate Classification
Petrol Cars with Engine < 1.2 Litre 28% + 1% Cess Petrol Cars for Mass Market
 Diesel Cars with Engine < 1.5 Litre 28% + 3% Cess Diesel Cars for Mass Market
 All other Cars 28% + 15% Cess All other Cars
GST Rates post New Development Rate Classification
Compact Petrol Cars with Engine < 1.2 Litre 28% + 1% Cess Compact Petrol Cars under 4 Meter
Compact Diesel Cars with Engine < 1.5 Litre 28% + 3% Cess Compact Diesel cars with Length < 4 Meter
Mid Segment Cars with Engine < 1.5 Litre 28% + 25% Cess Cars with Length > 4 Meter

Based on Existing Slabs, expected Category

 

GST Impact after increase in 10% Cess

Models Price Hike
Maruti Baleno, Honda Jazz, WRV, I20, Ford Ecosport, Maruti Brezza or Segment lower cars etc No Price Hike
Honda City, Hyundai Verna, Maruti Ciaz, Renault Duster, Nissan Terrano etc Rs 70K to Rs 1 Lakh
Mahindra XUV 500, Tata Hexa, Tata Safari Storme, Toyota Innova Crysta, Skoda Octavia, Toyota Corolla, Jeep Compass Rs 90K to Rs 1.5 Lakh
Toyota Fortuner, Ford Endevaour, Skoda Superb, VW Tiguan Rs 2 Lakh to Rs 2.5 Lakh
Audi Q3, A4, A6, BMW X1, 3 Series, GT,  Benz C, E, GLE, GLA Class Rs 2.5 Lakh to Rs 4 Lakh

 

Wefornews Bureau

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Flurry of lockdowns interrupted recovery in July 2nd half: Bajaj Auto

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New Delhi, Aug 12 : The flurry of lockdowns across the country in many major cities and states interrupted the recovery in the second half of July, according to Rakesh Sharma, Executive Director, Bajaj Auto. “As a result the outcome in July was a bit lower than June retails,” he added.

In an interview with IANS, Sharma said the demand for motorcycles saw smart recovery to previous year’s levels by end June.

On the target for sales, he said “At the start of the quarter, our plan was to achieve cumulative sales of 1 million vehicles between domestic and export, including motorcycles and 3 wheelers. So far, we have achieved sales of just over 2,50,000 vehicles, including three-wheelers in July. Hence, barring unforeseen issues caused by Covid, we should be in line to achieve our Q2 objective of 1 million vehicles,” Sharma added.

Pent up demand is playing a major role in the recovery. “Certainly there is a strong element of pent up demand as there was a blank out of retails for almost 60 days. This has been a major factor in driving the rapid recovery to normalcy witnessed in June and early July,” he said.

He added that the experience of June and July suggests that demand can stage a recovery quite rapidly and is strongly as well as singularly dependent on the progression of COVID and the administration’s response to it. “Hence it is difficult to make forecasts. Our approach is to manage our business in shorter time horizons and recover faster than the industry,” Sharma said.

The three-wheeler segment is yet to pick up across domestic markets, he said. “With people working from home or avoiding the public transport, the demand for three wheeler transportation has taken a hit. This has severely impaired the earning power of 3 wheeler drivers and owners which weakens their ability to take loans or service them. Hence the recovery in 3 wheelers is very poor at only 40% levels,” he said.

Sharma said there is no evidence of downtrading. Bajaj Auto offers a range of motorcycles, starting from the affordable CT 100 and Platina to the KTM 390 series, priced above Rs 3 lakh. “We have not seen preference shifting towards CT100 kick-start, which is the most affordable motorcycle in the industry. On the contrary our new introduction – the Pulsar 125 has outperformed all brands despite being the most expensive 125 cc motorcycle in the market,” he added.

Here are the excerpts…

Q: How do you assess the month of July for Bajaj Auto and the two-wheeler industry?

A: The demand for motorcycles had started to show a smart recovery to previous year levels by end of June and this trend had continued in July. However, the flurry of lockdowns across the country in many major cities and states interrupted the recovery in the second half of July. As a result the outcome in July was a bit lower than June retails. Bajaj Auto’s performance was in line with the industry performance except for the mid 125 cc segment where we recorded handsome retails ahead of the industry and market share gains.

Q: How much capacity is Bajaj Auto operating at and what are the targets for the coming months?

A: At the start of the quarter, our plan was to achieve cumulative sales of 1 million vehicles between domestic and export, including motorcycles and 3W. So far, we have achieved sales of just over 2,50,000 vehicles, including 3W in July. Hence, barring unforeseen issues caused by COVID, we should be in line to achieve our Q2 objective of 1 MN vehicles. This volume is well within our manufacturing capacity.

Q: There is some evidence on the ground that the demand being seen is pent up demand of the last two or three months when the country was under lockdown. What is your view?

A: Certainly there is a strong element of pent up demand as there was a blank out of retails for almost 60 days. It is correct to assume that the decision making process of many customers was interrupted and with the roll back of the lockdowns , these customers are returning to the dealerships. This has been a major factor in driving the rapid recovery to normalcy witnessed in June and early July.

Q: What are the growth estimates for the company and industry for the coming months?

A: The experience of June and July suggests that demand can stage a recovery quite rapidly and is strongly as well as singularly dependent on the progression of Covid and the administration’s response to it. Hence it is difficult to make forecasts. Our approach is to manage our business in shorter time horizons and recover faster than the industry.

Q: How is Bajaj Auto adopting safety measures for the plants and retail dealerships?

A: We have undertaken abundant measures for safe operations of our facilities and to ensure that our employees also feel reassured about their well being. The measures include new work protocols, adequate social distancing, screening and monitoring, regular sanitisation, installation of safety features, training and communication. In doing this we have ensured compliance to Government standards. We have defined these protocols for our dealerships too and provided them with training and monitoring support under the Bajaj SECURE programme. The objective is also to ensure that the customers feel safe about visiting our dealerships.

Q: What is the outlook for three wheelers in the domestic market?

A: The three-wheeler segment is yet to pick up across domestic markets. With people working from home or avoiding the public transport, the demand for three wheeler transportation has taken a hit. This has severely impaired the earning power of 3 wheeler drivers and owners which weakens their ability to take loans or service them. Hence the recovery in 3 wheelers is very poor at only 40% levels. For the outlook to improve, there needs to be more passenger traffic and the finance companies need to recalibrate their risk and return assessment of the sector.

Q: How are the export markets performing for Bajaj Auto?

A: We are currently present in more than 70 countries, but we extensively study the pattern of demand and performance in around 50 countries. We see a mixed reaction on demand in these countries as compared to India. We believe that on an average the demand has reached 80% to 85% of the normal level. Our retail has reached 88% to 85% this July as compared to same period last year. In the case of exports, the inventory pipeline is generally higher due to transit inventory and that creates about a month’s lag between retail improvement and shipment improvement. We are hoping that its positive impact will be sensed from September at our end.

Q: What are the changing consumer trends being seen in these Covid times?

A: On the basis of June and July retails we have not observed any fundamental shifts in consumer preference and therefore in the market structure. Certainly in times of uncertainty the consumer does become more conscious of value and examines the proposition more robustly. However, if a proposition delivers substantive value, they are not shying away from paying more. It is being reflected in the market structure — in terms of the relative shares of each of the different segments of bikes — which has remained intact and there is no evidence of downtrading. Bajaj Auto offers a range of motorcycles, starting from the affordable CT 100 and Platina to the KTM 390 series, priced above Rs 3 lakh. We have not seen preference shifting towards CT100 kick-start, which is the most affordable motorcycle in the industry.

On the contrary our new introduction – the Pulsar 125 has outperformed all brands despite being the most expensive 125 cc motorcycle in the market.

Q: The rural markets seem to be outpacing the demand in the cities?

A: The rural markets were faster to recover but most urban and semi urban locations have also recovered apart from the very big cities like Delhi and Mumbai. Apart from these recovery has been quite secular and evenly spread.

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Hyundai bets on diesel models, launches Tucson SUV

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Chennai, July 14 : The second largest car maker in India Hyundai Motor India Ltd while continuing to bet on diesel powered vehicles is also looking at faster demand recovery from tier 2/3 cities, said a senior official on Tuesday.

Hyundai Motor also launched its new premium sports utility vehicle (SUV) Tucson for the Indian market.

Speaking to reporters, Tarun Garg, Director (Sales, Marketing and Service) said the timing of Tucson’s launch is right as there are over five lakh Creta buyers in the country who are looking for an upgrade to a premium SUV.

The new Tucson’s starting price is about Rs 22 lakh.

“With over 6.5 million customers worldwide, Tucson is one of the best-selling SUV’s across the world,” S.S. Kim, Managing Director and CEO told reporters.

He said the model was unveiled at the Auto Expo 2020.

Garg said the booking for diesel engine models are growing and the demand is across the country and more so from tier 2/3 cities.

He said when the fuel prices go up, buyers will look at fuel economy and diesel engines are fuel efficient.

According to Garg, Hyundai Motor has got over 45,000 bookings for its SUV Creta model and 56 per cent of that are for diesel engine variant.

Similarly, one third of the booking for Venue and Verna are for diesel models, Garg said.

“SUV lovers want much more than the fuel economy which diesel vehicles offer. It appears demand will stablilise at this level. There is also good demand for petrol models,” Garg added.

Queried about the pay cuts implemented by various companies and its impact on buyers scaling down their model preference Garg said he is not seeing any such trend.

According to him, buyers prefer to come to the showroom to take delivery of new cars even though Hyundai Motor offers to deliver the car at their door step.

Garg said it is not possible to predict the likely sales for 2020 as some states have Covid-19 lockdown restrictions.

He said the company is watching the market behaviour on a monthly basis.

Garg said during June 2020, the company has reached 75 per cent of June 2019 demand figures, In July 2020 the car maker plans to touch 90 per cent of July 2019 levels.

On the availability of components as the company is planning to start third shift in its plant Garg said the localisation levels are very high and the dependence on components from China is very low.

According to Garg the company’s supply chain is ready to meet the demand for increased components as third shift production is soon to start.

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No BS-IV vehicles will be registered if sold after March 31: Supreme Court

This comes as India has decided to switch to the world’s cleanest emissions standard from April 1. It has gone straight to Euro-VI emission standards from Euro-IV.

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NEW DELHI : The Supreme Court on Wednesday observed that no BS-IV vehicles will be registered if sold after March 31, 2020.

A bench of the Apex Court, headed by Justice Arun Mishra was hearing the matter pertaining to sale of BS-IV vehicles during COVID-19 lockdown, via video conferencing.

The top court recalled its earlier March 27 order allowing sale of BS-IV vehicles for 10 days post lockdown. The apex court had back then allowed marginal relief to auto dealers and auto companies, permitting sale of 10% unsold BS-IV inventory.

Justice Arun Mishra said, “Please do not take advantage of this court by playing fraud. You have told us no sales have taken place. You are understating your values.”

He said, “no vehicle could be registered without our order.” “You have sold more than allowed,” the court noted.

KV Vishwanathan, lawyer for FADA, said, the apex court allowed registration in March 2020.

However, the Bench asked how vehicles were sold during lockdown.

“It would be violation of the spirit of the court order if we allow sales after opening of lockdown,” the Apex Court said.

This comes as India has decided to switch to the world’s cleanest emissions standard from April 1. It has gone straight to Euro-VI emission standards from Euro-IV.

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