By Ruma Dubey

“We are highly disappointed with the decision. This will... affect our future plans of expansion under (the) ‘Make in India’ initiative,” said Roland Folger, MD and CEO of Mercedes-Benz India.

Audi India head Rahil Ansari said, “We will be forced to re-evaluate our business plans in light of this development.”

Other SUV makers too have issued veiled threats; Toyota said that might now curtail its expansion plans, turning its Indian companies into holding operations. Many others have also announced postponing or even doing away with launch of fresh models.

This is the reaction of SUV and luxury car makers after the GST Council approved hiking cess from 15% to almost as high as 25%. If this hike in cess does come in, price of luxury cars and SUVs could rise from anywhere between Rs.72,000 to Rs.2.58 lakh.

Those in the industry have pressed the panic button, saying that it will lead to major job cuts and production cuts.

One cannot help but wonder if all these are not over reactions? The Govt’s policy all through has been that of taxing those with money and give benefits to the poor. This hike in cess on SUVs and luxury cars is just one more of the same ideology. The idea is that if you have money to buy a SUV or luxury car, surely you can afford this increased cess.

Seriously, there is nothing wrong in making these vehicles expensive. Forget the damage being caused to the bruised and battered environment, the simple thing is that in a country like India, where fuel is imported and cost of living is burning a hole in the pocket, this lure for SUVs makes no economic sense.  Ironically, despite the consistent hike in petrol rates, people continue to buy SUVs.

Yes, there are other reasons too – higher seating capacity, SUVs are safer as they are larger and heavier, higher cargo capacity, can tackle the potholed roads better than a small car and maybe, it is good when going traveling off the beaten track.

But these are all reasons to justify the choice of a SUV. Yes, the real reason is that people in India buy an SUV today simply because they know and want to exhibit that they can afford to buy a SUV. They buy simply because they can. Surely with families becoming smaller, cars should have ideally got smaller but today, smaller families have bigger homes and bigger cars. Like America, India is unfortunately fast moving towards consumerism. Every buy is today driven by this need to ‘show’ rather than about practicality.

What does not go down well is this flip-flop attitude of the Govt. If this was its intention, why did it not have the courage to bring this cess when the GST was ushered in. The Finance Minister said that there would be no major tinkering; so isn’t this going back on his words?

Under the GST, effective 1^st July 2017, the cess was fixed at 15% and the eventual tax outgo worked out much lower than pre-GST times. Following this, many got their prices down, passing on benefits to the consumer. So now if the cess does get hiked, companies will increase the prices. This flip-flop is what is irking.

The constant shift in policy tarnishes the image. Maybe the Govt realized it made a mistake as price of SUVs came down and is now trying to correct it. Whatever be the reason, this news does not bode well for the Indian SUV and luxury car makers.