Higher cess may hit demand for luxury cars, say automotive manufacturers
DSIJ Intelligence / 19 Aug 2017
In case the government decides to go ahead with increasing the cess on luxury vehicles, the expected double-digit growth in this segment is likely to be negatively impacted.
In case the government decides to go ahead with increasing the cess on luxury vehicles, the expected double-digit growth in this segment is likely to be negatively impacted.
Earlier this month, the GST Council decided to hike the cess charged on large cars and utility vehicles from 15% to to 25%, increasing the total tax incidence to 53% (28% GST plus 25% cess). The new rate is comparatively same to the pre-GST levels for luxury vehicles.
The new rate has not yet come into effect but the automotive industry fears that passing the cost burden to customers will hit sales.
After a sluggish performance in 2016, luxury car manufacturers had glimpsed a ray of hope when India set levies on the segment under the Goods and Services Tax (GST) at a lower rate compared with the previous regime.
The OEMs had then announced price cuts to lure more customers and this had resulted in a rise in demand. However, the cess effect may hit the temporary buoyancy in this market.
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