GST: Big utility vehicles become the biggest beneficiary

MUMBAI: The big utility vehicles (UVs) have become the biggest beneficiary under GST, the big SUVs have become attractive by 7-12% depending on the State.

And timing it to perfection, some half a dozen high profile SUV (sport utility vehicle) launches are planned in the second half of 2017. In a highly competitive environment, the lower GST (Goods and Services Tax) will enable these companies to price their product aggressively and take the share of utility vehicle segment beyond 25%.

The new launches include Chrysler Jeep, Renault Capture, Tata Nexon, Mahindra’s global MPV designed out of North America Technical Centre and a rugged 7 seater SUV, which may offer higher acceptance in the rural areas. Maruti Suzuki will be launching the facelifted S Cross. At the premium end of the market, Skoda will launch the Kodiaq SUV, Mercedes Benz has a new version of GLC coming up and BMW will be launching the new X3.

Pawan Goenka, MD at the largest utility vehicle maker Mahindra and Mahindra said the correction in rates for SUV was long overdue, as the segment was selectively being levied with higher rates.




As against 24% excise duty for mid-size sedans, the tax on SUV was spiked to 30%, on constant pleas from the vehicle makers the industry was assured that this abnormality will be corrected with GST.

“In some sense we have a level playing field now, which was tilted against SUV. With this correction, our SUVs like XUV becomes more competitive and attractive when compared to a sedan in the same price bracket as the relative tax difference between large sedan and large SUV has come down, which may see some shuffle,” said Goenka.

The Indian utility vehicle segment has been the fastest growing segment in the passenger vehicle space. Led by Maruti Suzuki Vitara Brezza and Hyundai Creta, the utility vehicle segment grew by a whopping 30% in FY17 and accounted for almost a fourth of the overall passenger vehicle market.

Experts said the Indian utility vehicle segment is set to cross 1 million unit annual sales mark in the domestic market within the next couple of years itself.

According to Gaurav Vangaal, Senior Analyst for forecasting at IHS Markit, the utility vehicle segment will cross the production milestone of 1million this year itself, with the likes of EcoSport and Creta SUVs are exported in larger numbers from India to other emerging markets.

“SUVs world over are the fastest growing segment and India is not behind. With the tax reforms, the segment has become more attractive, that not only allows vehicle makers to price their vehicles more attractively for domestic market, but the lower tax means as a manufacturing base India becomes more competitive and it allows global companies to use the country as a manufacturing base, which has already become large, thanks to Eco-Sport and Creta,” added Vangaal.

Mayank Pareek, president for passenger vehicle division at Tata Motors said the company can’t comment on the pricing but assures that the Nexon SUV will be competitively priced much like its previous products.

Pareek said with the evolution in the industry, the market is maturing and as a result sub segments are emerging.