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Thursday, 31 August 2017

M&M falls 1% after Cabinet approves increase in GST cess on luxury cars, SUVs

Automobile firms, including Mercedes-Benz, Audi and JLR, today said this proposed hike in cess will adversely impact growth momentum of the segment.

FREE STOCK TIPSMahindra & Mahindra shares fell over a percent after the Cabinet cleared promulgation of an Ordinance to increase the cess on mid-size, large cars and sport utility vehicles up to 25 percent from 15 percent now, under the new GST regime. Tata Motors and Maruti Suzuki India also trimmed their gains in later part of trading session, both ended with 0.6 percent gains.

The ordinance would come into effect after it receives Presidential assent, which will enable amendments in the GST (Compensation to State) Act, 2017. The Central Board of Excise and Customs will issue a formal notification on the raised cess cap. FREE STOCK TIPS

Two out of 12 categories of vehicles will be affected by the hike in the cess cap.

Automobile firms, including Mercedes-Benz, Audi and JLR, today said this proposed hike in cess will adversely impact growth momentum of the segment.

They also criticised the government's "hurry to implement the hike in cess" saying a review could have been taken after six months when impact of GST would have been clearer.

Grant Thornton India Partner Sridhar V said the additional 10 percent cess will have a dampening impact on the otherwise increased demand expectation for luxury cars and SUV.

"This decision, contradictory to the requirement of creating a sustained demand for the luxury car in this market, would rather affect the growth momentum adversely," Mercedes- Benz India MD & CEO Roland Folger said in a statement.

The automotive segment has not even settled in to see the effect of the marginal relief in terms of rationalisation of taxes in the GST regime, he added.

Mahindra & Mahindra Managing Director Pawan Goenka, however, said the passing of ordinance to increase limit of cess to 25 percent on certain class of vehicles, was along the expected lines.

"We earnestly hope that the government and the GST Council will give due consideration to this matter and desist from raising the cess and putting a dampener on the positive momentum in demand that the industry had started to witness since July 1," Jaguar Land Rover India President and Managing Director Rohit Suri said.
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