Luxury cars, SUVs to cost more; Mercedes-Benz complains

  • Luxury cars, SUVs to cost more; Mercedes-Benz complains

Luxury cars, SUVs to cost more; Mercedes-Benz complains

The higher end cars were taxed at the peak GST rate of 28 percent with a cess of 15 percent.

To give effect to the GST in the state from July 1, the government had promulgated the Kerala Goods and Services Tax Ordinance, in June last. While passenger vehicles larger than 4 meters account for 28-30% of the total sales in India, it contributes to 50-60% of the industry turnover and therefore make a much larger contribution to the government.

Placing a commuter vehicle like Honda City or the Maruti Suzuki Ciaz in the same tax bracket of luxury cars is not right. The plan is approved to increase taxes from the present 15% upto 25% so as to correct an anomaly that has risen after new GST rates were announced.

Mercedes-Benz, owned by Daimler AG, is one of the biggest luxury vehicle sellers in India, and a senior company executive said that the constant shift in policy in the country was making long-term planning for India "highly risky".

The Goods and Services Tax (GST) Fitment Committee - which is responsible for calculating the tax rates on various goods and services - at its meeting on July 25 felt that the total tax incidence in GST seems to have come down vis-a-vis pre-GST total tax figure.

After GST, most of the luxury vehicle manufacturers passed on benefits of GST to customers as prices were reduced.

The joy for makers of sports utility vehicles (SUVs) and large cars will remain short-lived.

And now, to change that cess rate, an amendment to this law will be needed. "As a leading luxury vehicle maker, this will also affect our future plans of expansion under "Make in India" initiative, which aims at making and selling world-class products in India, with the latest technology for end consumers".

Roland Folger, Managing Director and Chief Executive of Mercedes-Benz, also spoke on similar lines saying: "This will also affect our plans of expansion under the Make in India initiative".

While manufacturers with larger portfolios of mid-segment, large cars and SUVs have protested vociferously, analysts say automakers' strategies may shift toward small petrol and diesel vehicles, which still stand to gain some tax benefits.

Audi India Head Rahil Ansari said, "We will be forced to re-evaluate our business plans".

"Increasing the cess on the luxury auto industry will dampen the spirits of not only the companies, dealers and customers but also workers and employees working in this industry".

Pointing out that the bill was passed in the Lok Sabha before the LDF government came to power in May 2016, Isaac said he agreed with the criticism that the prices of essential commodities had not come down after GST was implemented.