Auto majors Maruti Suzuki India Ltd. and Honda Cars India Ltd. are working towards reimbursing their dealers for losses incurred on transition stock as a result of a fall in tax rates for most categories under the new Goods and Services Tax (GST) regime.
Dealers and customers would be fully compensated as the result of the reduction of prices, representatives from both the market leader and third-placed car maker said at the sidelines of an ASSOCHAM event in New Delhi, adding that they are beginning to see a rise in sales on account of lower prices.
(For) majority of our cars, we got some benefits in terms of reduced tax; we have passed them on to the customer by reducing the prices immediately.RS Kalsi, Executive Director (Marketing & Sales), Maruti Suzuki
Honda Cars, too, plans to pass on benefits to its customers, along with compensating its dealers for any losses on transition stock, President and Chief Executive Officer Yoichiro Ueno told BloombergQuint.
The company, however, will not compensate its dealers for any losses incurred by them on spare parts already purchased at higher prices, he said. Dealers have not raised any issues on the lack of reimbursement as the losses are likely to be rather low, he added.
GST Blow To Hybrid Vehicles
Both Kalsi and Ueno said they have appealed to the government to reconsider the high tax rate on hybrid vehicles, presently at par with more polluting diesel vehicles and luxury vehicles.
The GST rate for hybrid vehicles is at 28 percent, along with an additional cess of 15 percent, equal to large diesel sport utility vehicles and luxury cars. In comparison, the tax rate for electric vehicles is at 12 percent.
Maruti Suzuki sells diesel hybrid engines in its Ciaz mid-sized sedan and Ertiga utility vehicle, while Honda Cars has the Accord Hybrid premium sedan as a part of its portfolio. Both manufacturers said prices of their hybrid models had been revised upwards, and they expected a negative impact on sales due to the price increase.
Earlier in the day, Mahindra & Mahindra Ltd. said it will phase out its only vehicle with hybrid technology – the Scorpio mild hybrid – as higher taxes make the model unvialble.
Apart from hybrids, Maruti Suzuki and Honda Cars expected a rise in sales due to the reduction in prices of most of their other models under the GST regime. The reduction in tax rates, along with good rains and the disbursement of allowances under the seventh pay commission were likely to augur well for vehicle sales, Kalsi said.
Dealers re-stocked themselves after clearing out their yards in the run up to GST, Ueno said resulting in a sales growth during the months of July and August. The inventory levels during these months had dropped to seven-tenths of the normal monthly inventory with Honda Cars' dealers, he added.
Also Read: Hello GST: Almost All Maruti Cars Get Cheaper
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
