Luxury cars, sports utility vehicles (SUVs) and big cars are set to get more expensive, reports Team B&C
The government approved an ordinance that will allow the cess levied on luxury cars, SUVs under the goods and services tax (GST) regime to be raised to as much as 25 per cent. The GST Council has decided to increase the cess on luxury cars and SUVs from 15per cent to 25 per cent. The final decision as to when the increased taxation will be applied is likely to be announced on September 9. All the massive price drops on luxury cars and SUVs post the implementation of GST on July 1, 2017, is going to end soon. The GST council which was mulling over raising cess finally took the decision to increase it to 25 per cent.Since the implementation of GST, all the indirect taxes have been replaced by GST. Besides GST, an additional cess has also been implemented on all automobiles, ranging from one per cent to 15 per cent currently depending on the vehicle and fuel type.
Where only the small cars (sub-4m with petrol engine capacity less than 1.2-litre and diesel less than 1.5-litres) attract one per cent cess for petrol and three per cent for diesel models rest all other cars presently attract 15 per cent cess. Now, this upper limit of the cess has been revised from 15 to 25 per cent. Take the midsize sedans, for example, viz. cars with large displacement engines (more than 1.5-litres), such as the new Hyundai Verna.
As such 2016 was a mixed bag year for luxury car makers. The segment saw a steady growth overall in terms of sales with new launches, new variants and of course new brands finally entering the scene. However Mercedes-Benz, leading player in the luxury segment witnessed slight volume drop in sales. This according to the company was attributed to the various factors, such as the Supreme Court’s ban on registration of diesel vehicles over 2.0 litres. The additional one percent tax that was levied by the government on cars that cost more than Rs 10 lakh earlier in the year also drove prices up for buyers while later in the year, demonitisation saw a sharp decline in November and December sales figures. Overall 2016 was a year of market challenges for luxury car makers in India.