A Honda Accord Tourer car displayed at the 78th Geneva Car Show _ Reuters
A Honda Accord Tourer car displayed at the 78th Geneva Car Show _ Reuters

Japanese auto maker Honda feels the Indian government’s move to hike the cess on sport utility vehicles and luxury cars to 25% from 15% under the new indirect taxation reform, Goods and Services Tax (GST), would affect the country’s progress towards becoming a global automotive hub.

It also urged the government to re-consider high levels of taxation on environment-friendly hybrid vehicles.

Yoichiro Ueno, the President and CEO of Honda’s Indian unit Honda Cars India Ltd (HCIL), has termed the move as a “big disappointment” and will “isolate India as a market with too much bias towards small cars”, reports PTI.

He said the company had ‘sincerely welcomed’ the tax reform achieved through GST implementation from July 1 hoping that it would be a big boost for the automobile industry in India.

“However, the latest government move to increase the ceiling on the additional cess on automobiles from 15% to 25% on larger cars and SUVs, is a big disappointment,” he said.

Such a move will impact the growth of advanced global models in India, he said.

Currently, large cars and SUVs attract top GST rate of 28% with a cess of 15%. However, earlier this month, the GST Council approved a proposal to hike their cess to 25%.

The Indian automobile industry is moving towards globalization in emission norms and safety standards. But too much focus on small cars and the tax benefits to them will isolate India from the global automobile trends, he added.

“It will also impact the development of the Indian automobile industry. It makes export of both completely built units (CBU) vehicles and auto components more difficult and poses hurdles to India in the way of becoming global hub for automobile production,” Ueno said.

A lot of models which are classified as entry segments in other countries are regarded as luxury models in India just because it is over four meters in length, he said.