New Delhi: Hyundai Motor India Ltd (HMIL) on Tuesday sought clarity from the government on extra cess planned to be levied on large cars and SUVs, while asking how a luxury car is defined for taxation purpose under the goods and services tax (GST).

Under the current GST rates, the company’s models such as all new versions of its sedans Verna and Elantra attract the same rate as luxury models from BMW, Mercedes and Audi. In the pre-GST system, these models from Hyundai attracted a lower tax rate than other luxury vehicles. “We don’t know what’s going on. What is luxury?" Hyundai Motor India MD and CEO Y.K. Koo said. The company is seeking clarity on how a luxury car has been defined under the GST with some of the common models even attracting similar rates as the so-called luxury vehicles.

“There is a need for more clarity from the GST council regarding definition of various provisions such as engine size and vehicle length," Koo added. Under the GST regime, large cars and SUVs with an engine capacity greater than 1,500cc and with a length of more than 4 metres attract cess of 15% in addition to the top tax rate of 28%. The GST council has approved a proposal to hike cess on them from 15% to 25%. The decision on when to raise the actual cess leviable on the same will be taken by the council in due course.

On the government’s move to hike cess on large cars and SUVs, he said, “We are little confused regarding extra cess that the government is planning to levy." When asked about possible impact if the cess were to be increased by 10%, Koo said prices would go up but “at the moment we are not sure what would be the quantum of hike. We are waiting for some clarity on the issue". When asked about Hyundai’s plans to introduce electric vehicles in India, Koo said the company is reviewing various options, including SUVs from its global line up.

It has, however, shelved plans to bring in hybrid vehicles to the country as the current government taxation policy does not favour hybrids, he added. Already companies, including Mercedes Benz, BMW, Audi and Toyota, have said the move to hike cess on large cars and SUVs to 25% was against the spirit of liberal market dynamics and would affect future plans of expansion under the “Make in India" initiative.