Luxury vehicle pricing will see at least 5% hike compared to pre-GST era with the 25% cess applied
Luxury car pricing in the country could go up by at least 5% compared to pre-GST era if Indian government applies 25% GST over and above the 28% GST in the revised tax structure proposed by GST Council just a few days ago. German luxury auto giant Mercedes-Benz believes that as the total tax incidence for the luxury vehicles will be a whopping 53%, it is expected to affect the sales significantly.
The German automaker clearly says that luxury car industry contribute a lot in job creation in India and higher pricing for luxury vehicles could affect that too. Initially, GST Council slapped 15% cess on the luxury vehicles over and above the 28% GST, leaving the total tax incidence to 43%. This move was appreciated by the luxury car manufacturers as the total tax amount for luxury vehicles were lowered compared to pre-GST era.
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Several luxury car makers slashed pricing of their products significantly. Sales were expected to grow significantly. But, in the latest revised tax structure the total tax incidence goes up by 10% higher. Indian government is expected to increase the luxury car cess by an ordinance according to the proposal of the GST Council.
This price hike will directly impact the pricing and sales of the luxury car brands like Mercedes-Benz, Audi, BMW, Jaguar, Land Rover etc. Also, automakers like Mahindra, Toyota are expected to be impacted adversely as well. Speaking about the increase of workforce in the country, Mercedes-Benz is not ruling out the opportunity. But, for that the company wants to have a sustainable pricing direction.
Apart from the luxury cars, the revised tax structure will also affect the pricing of the cars with length more than 4 metre and engine displacement of over 1,500 cc. These vehicles too will be slapped with 25% cess over and above 28% GST compared to the initial 15% cess.