GST impact: Toyota Kirloskar halts Camry hybrid production as sales fall a sharp 73%

Toyota Kirloskar Motor, the Indian arm of Japanese major Toyota Motor Corp, has halted the production of hybrid version of its Camry model as sales declined a steep 73 percent after tax incidence on the cars hit 43 percent under the Goods and Services Tax (GST) regime. According to a report in the Economic Times, the production of the Camry was halted in the dedicated Bengaluru assembly line at the end of the September quarter. The ex-showroom price of the model in Delhi, a key market for hybrid cars after Arvind Kejriwal’s decision to cut VAT, had risen to Rs 38 lakh from Rs 32 lakh under the GST regime. [caption id=“attachment_429122” align=“alignleft” width=“380”]  Toyota Camry. Pic Courtesy: Toyota.com[/caption] As per the GST Council ’s decision, the hybrid models fall under 28 percent tax slab and another 15 percent is also applicable. However, it has been exempt from the 5 percent additional cess imposed on luxury cars. Terming the 43 percent tax on hybrid cars “punitive”, Shekar Viswanathan, vice chairman at Toyota Kirloskar Motor, has told the newspaper that there is no business case for hybrid cars in India post-GST. The company has made a total investment of nearly Rs 40 crore in the Bengaluru facility. According to a study by the company cited by the ET report, after the steep tax and cess, it will take 17 years for a buyer to recoup the premium paid for hybrid cars. This would take just 18 months under VAT. As of now, there are no chances that the GST Council will take a lenient stand on the tax issue. In June, finance minister Arun Jaitley had hinted that the tax rate on hybrid cars will not be reviewed, saying the industry demands were not in sync with a study conducted by tax officers. “We have done a detailed study on auto industry demand and a paper has been made which will be circulated among members. And, if necessary, it would come up for discussion. The fact that is being presented (by the industry), according to the paper, is not correct,” Jaitley had said.