Calcutta, Aug. 20: Toyota Kirloskar Motor is bracing for a slowdown in industry growth as well as its own sales growth in November as the central government puts forward a proposal before Parliament for a hike in cess on cars over four metres in length.

The Goods and Services Tax (GST) Council has cleared a cess of 25 per cent on automobiles above four metres in length. If this proposal is cleared by Parliament, the tax component on cars above four metres will add up to 53 per cent - 25 per cent cess and 28 per cent GST.

The company, riding high on post-GST price reductions, had recorded its third highest domestic sales of 17,750 units in July 2017.

Talking to The Telegraph over phone, N. Raja, senior vice-president (sales & marketing) of Toyota Kirloskar Motor, said: "The proposal for a hike in cess just a month after the rationalisation of the tax structure through GST comes as a rude shock for us. We are surprised that the government has decided to hike tax so soon without assessing the effects of GST. The central government should at least watch what the impact of GST is for a period of three months."

According to industry sources, the government is worried about low tax collections post GST. "Instead of reacting in such a knee-jerk fashion, the government should have waited to see how demand picked up post GST, which would in return result in higher tax collections because of a growth in volume," said Raja.

Post GST, both sales and enquiries had risen at Toyota with a price slash of Rs 1,25,000 on the Innova and Rs 2.25 lakh on the Fortuner. As a result, 3,400 units of the Fortuner sold in July 2017 (the highest ever for the SUV), while 9,300 units of the Innova Crysta sold in the same month.

However, the July sales in Toyota, pointed out Raja, in effect combined the June and July sales. That was because the company in preparation of the GST roll-out had waited for stocks to dry out in June.

"We did not put pressure on our dealer partners to buy stocks in June as the government was not paying back the taxes apart from the excise duty," said Raja.

While the proposal for cess hike is not likely to dampen festive buys the effect will be seen by the year-end, says Raja. "Toyota witnessed a growth of 8-9 per cent and the industry grew 10 per cent. But with this hike, growth is likely to stagnate at 7-8 per cent in the industry," he said.