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Luxury OEMs worry over increased cess on cars and SUVs

Luxury OEMs worry over increased cess on cars and SUVs

Snapshot: Once the revised levy comes into effect, the impact is expected to be more conspicuous for the luxurious cars and SUV manufacturers, such as Audi, BMW, Mercedes Benz, Toyota etc.

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As the Indian Cabinet has approved an ordinance complying the increased cess on larger luxury cars and Sports Utility Vehicles (SUVs) from 15% to 25% under the GST regime, India’s top automobile manufacturers expect a slump in the demand for premium cars and SUVs in India.

Once the revised levy comes into effect, the impact is expected to be more conspicuous for the luxurious cars and SUV manufacturers, such as Audi, BMW, Mercedes Benz, Toyota etc.

Rahil Ansari, the Brand Director of Audi India has said that the taxes on the auto industry are already at a higher-end and this additional rate of cess will certainly affect the sales in the luxury car industry. “This is bound to adversely impact sales, leading possibly to a double-digit contraction”, he added.

The affected auto segments include medium and large cars, SUVs and transporters that can carry more than 10 people, but less than 13. Also, hybrid vehicles with more than 1,500 cc engine capacity and hybrid cars of less than 1,500 cc fall into the affected category.

In Indian automobile industry, cars larger than 4 metres have a varying share in the tax fund as they account for 28-30% of total volume sales, but contribute 50-60% of the industry turnover. While accounting for about 1% of total passenger vehicle sales locally, the luxury auto market contributes 10% by way of value.

“GST removed the cascading impact of multiple taxes… and that enabled the industry to reduce prices and expand the market, which had been declining because of high taxation,” said Rohit Suri, the President of Jaguar Land Rover India. He also added, “The expansion in demand would have enabled further investments in local manufacturing and job creation across the supply chain — factories, showrooms, workshops and logistics service providers.”

The Indian government has earlier notified the drop in tax incidence on the auto industry before the forthcoming hike in the cess on larger vehicles from 15% to 25%. The cess on small vehicles will remain 1-3%. Hence, prices of the hatchbacks and compact SUV models like the Maruti Swift Dzire, Tata Tiago, Renault Kwid, Hyundai i10 are unlikely to be affected.

Check here to read about Top Lxurious Cars in India

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