Union Cabinet Approves Hike in Cess On Luxury Cars And SUVs

Update: August 30, 2017 | Union Cabinet Approves Hike in Cess On Luxury Cars And SUVs

Hike in cess on luxury cars and SUVs was recently approved by the Union Cabinet. They have proposed 25% of cess over the current rate of 15%. After getting this proposal passed from the President, Central Board of Excise and Customs will notify a date from which the changes will be applicable.

The formal meeting with GST council will take place on September 9. This will mean a rollback of prices of all the cars falling under SUV and luxury car category, which were reduced on July 1 by around INR 3 lakh for cars like Fortuner and Endeavour. This report will have a drastic hit on prices of Mercedes Benz, BMW and all other luxury car manufacturers. Together, they may approach the government regarding this decision.

Original Article: August 8, 2017 |SUVs, Luxury Cars to Get Expensive as Govt to Increase GST Cess from 15% to 25%

GST (Goods and Services Tax) is an indirect tax applicable across India which replaced the multiple other taxes issued by the Indian Govt on several goods and services. With the amendment of GST there may have been some bad effects on the economy with certain increases in the prices of the day to day products, but the one thing worth appreciating was decrease in the prices of various SUVs and luxury cars.

The automobile industry was one of the biggest beneficiaries of the GST roll out. The ability to afford a luxury car had become a little bit easier, but unfortunately this deal is not going to last for much longer time. To correct a so-called “anomaly” that crept in when goods and services tax (GST) rates were decided, Sports Utility Vehicles (SUVs) and top-end luxury cars are expected to cost more with states and the Centre seeking to increase the cess on these vehicles.

According to the sources, the cess is going to increase from 15% to 25% which is a much larger leap into the total costs of the luxury cars making them once again out of the reach of some people. The Goods and Services Tax (GST) Council has taken a decision to this effect but has not discussed this yet, the reports said. The increase in the cess will take the effective tax rate on these cars to 53 percent.

Meanwhile small petrol cars with engine less than 1,200 cc will continue to attract only 1 percent cess, while small diesel engine cars of less than 1,500 cc will attract 3 percent cess. Among luxury brands, BMW cut prices ranging from Rs 70,000 on base end version of X1 to Rs 1.8 lakh on the top end of its sedan 7 series and Jaguar Land Rover by an average by 7 percent.

GST Council’s plan to hike cess on luxury cars and SUVs from 15% to 25% will result in production cuts, job losses and dent ‘Make in India’ initiative, say auto firms.

“This move will impact production and jobs. I am surprised. I have no face to show to our principals in Japan,” Shekar Viswanathan, vice-chairman of Toyota Kirloskar Motor Pvt. Ltd, said in a phone interview. “This move will end up favouring one set of players vs another set of players.”

“The constant shift in policy makes our long-term planning for the market highly risky, and we think this would only have an adverse impact on the country’s financial ratings,” said Roland Folger, managing director and chief executive, Mercedes-Benz India.

Though the decision of increasing the cess seems almost final, only the after effects will ultimately define the future of the automobile industry in India.