Auto Parts Asia — November 2017

AutoPartsAsia | NOVEMBER 2017 | 49

dimensions, engine size and ground
clearance. The cess slabs were
fixed at – one, three and 15 percent.
However, the cabinet recently cleared
an ordinance to increase the State
Compensation Cess limit under GST
from 15 percent to 25 percent on
automobiles.

According to SIAM, “The cabinet
clearance of the Government
proposal for an Ordinance to
increase the State Compensation
Cess limit under GST from 15
percent to 25 percent on automobiles
is an unfortunate decision. Although
the clearance of the Ordinance is
just an enabling clause for the GST

Council to be able to increase the
cess but it is clearly evident that the
Government’s intention is to increase
the overall tax burden on many
different categories of vehicles.” This
will increase the post-GST price of

many vehicle categories from Pre-

GST level and have a negative impact

on sale of such vehicle models in the

market.

“This is a contradictory position of the

Government. While on the one hand it

has identified the automotive industry

as a sunrise sector of the economy, on

the other hand it is being treated as a

demerit product,” SIAM added.

SIAM added that all the vehicles

that were attracting 24 percent or 27

percent excise duty in Pre-GST regime

may potentially attract higher tax

under the GST regime because of this

decision. The hike in total tax could be

as high as 10 percent in some cases.

SIAM requests Government and GST

Council to reconsider increasing GST

Compensation Cess on any category

of vehicles in keeping with the promise

of moderating the extremely high

levels of taxation in the pre GST

regime.”

Abhishek Jain, Tax Partner, EY,

said, “As expected, the cabinet has

approved the increase in the cap of

compensation cess on cars from 15

to 25 percent. The increase in cap

is an enabling provision; it does not

mean that the cess on all cars, that

is small cars or hybrid cars, will also

attract a cess of 25 percent. The 25

percent cess may be imposed only

on top-end luxury cars and not on all

categories of cars.”

Aftermarket

A tax rate of 28 percent on spare

parts sold in the aftermarket is too

heavy for the Indian consumer. The

spare parts industry has to face the

menace of spurious parts and the

price-sensitive Indian buyer often

opts for fake, unsafe products. Most

consumers buy spare parts only to

replace worn out parts or to correct

accidental damages. Imposing such

a heavy tax rate upon such incidents

has made the market much more

sensitive to price.

NB: Photos are representational.