Luxury cars will be expensive in India due to an unexpected move by the government. Recently several automakers have announced the price hike from 2018, and now luxury cars will be even more dearer.
Lok Sabha has approved a bill to increase the cess on luxury vehicles from 15 percent to 25 percent The 25 percent cess will be added to the already implemented 28 percent GST on cars over 4-metre length.
The cess on luxury cars has been hiked to compensate the states for revenue loss due to the rollout of Goods and Service Tax (GST). The newly passed bill will replace the ordinance issued in September 2017, by the GST council, which increased the GST on cars over 4-metre length.
The initially issued ordinance by the GST council had several brackets which saw an increase in cess from 15 percent to 17 or 20 percent for cars and 22 percent for SUVs. But now with the latest hike, the cess rate will stand at 25 percent.
The increased cess rate means all the luxury cars will cost more from the coming weeks in addition to the already announced increase in price from 2018. But it is not clear whether the cess will be levied as per body style, or it will be a flat cess rate of 25 percent across the categories.
The increase in cess rate to 25 percent will undoubtedly have an adverse impact on the Indian luxury car market. The implementation of GST was welcomed by most of the Indian automakers, but the constantly changing cess rates will not do any good for the Indian auto industry.
Recently, India's major automakers such as Mahindra, Skoda, Ford, Jeep, Volkswagen, Tata Motors, Isuzu, Nissan and Toyota has announced that the prices of its models will be increased from 2018. The price hike is part of a cyclical price revision due to increase in input and manufacturing cost.
The Indian luxury car market has been struggling in the past few months due to the constant change in tax rates. Now, the government has again increased the cess on luxury cars in the country which will further affect the automakers. Expect the major automakers to announce the updated price list in the coming weeks.