Luxury car prices are expected to go up by 8 to 10%, according to industry analysts, following the Union cabinet's approval of an ordinance to increase the maximum cess that can be levied on certain luxury vehicles to 25% from 15%.
While Mercedes cars will be costlier by a minimum of Rs 3 lakh, an Audi Q7 will see a price increase of Rs 7 lakh, while an Audi A6 will be costlier by Rs 5 lakh.
Rahil Ansari, Head, Audi India, said, “The taxes on this industry are already very high and this increase in cess rate will be detrimental to the luxury car industry as we will be forced to hike our prices to levels higher than the pre-GST period.
"This is bound to adversely impact sales by possibly a double-digit reduction and will consequently reduce revenues for the company, dealers and perhaps also tax revenues for the Government. While the overall impact will still have to be evaluated in some time, we will be forced to redraw our plans for the Indian market based on future projections in this scenario," he said.
Mr. Ansari said the luxury car industry in India, while small in volume, still contributes over 10 percent in value. While the segment definitely needs more positive initiatives from the Government to be able to deliver a bigger contribution to the Indian economy, this scenario is clearly a setback, he said.
"We request the GST Council to carefully evaluate the negative impact on this," he added.
Rohit Suri, President and Managing Director, Jaguar Land Rover India Ltd said, "We earnestly hope that the Government and the GST Council will give due consideration and desist from raising the cess and putting a dampener on the positive momentum in demand that the industry had started to witness since 1st July.”
Roland Folger, Managing Director and CEO, Mercedes-Benz India, said, “The luxury industry is already highly taxed, which constrains its growth. Now, with this proposed measure, the luxury car industry is going to decelerate. If at all it was required, a review could have been taken after six months when the outcome of the GST regime would have been clearer.
"GST was implemented effective 1st July so that the market would not experience any untoward reaction during the festive season in India.
“In any case, the hurry to implement the hike in cess is frankly quite surprising to us. What we understand from the press reports is the fact that the collection of tax has been above expected and it would have been ideal to give the industry more time to analyze the outcome of GST on our business.
"We reiterate, this decision, contradictory to the requirement of creating a sustained demand for the luxury car in this market, would rather affect the growth momentum adversely," he said.
