Budget 2019: Luxury Carmakers Demand Reduction In GST Rates

Luxury carmakers have been demanding to reduce the GST rates on vehicles ever since the GST council had increased the cess to 25 per cent. Rohit Suri, Head- Jaguar Land Rover India had recently appealed to stop classifying luxury cars as ‘sin goods’ and reduce GST on them. Ahead of the budget session, other carmakers have also joined the fray and are expecting the budget committee to reconsider revising the GST rates on all passenger vehicles measuring above four metres.

Mercedes-Benz India, the largest luxury carmaker in India has also shown concern over the slowdown. Commenting on the similar lines, Martin Schwenk, MD & CEO, Mercedes-Benz India said, “Given the favourable outcome of GST in terms of rising revenue, we wish the Government would reconsider the rationalization of GST rates for cars which currently attracts 28 per cent GST and 17 per cent – 22 per cent Compensation Cess. We recommend a downward revision of GST rate on all cars to 18 per cent from 28 per cent, and a proportionate reduction of CESS to around 15 per cent for all cars above 4 meters. This will act as a much needed catalyst for growth of the industry, especially when it is facing subdued customer interest due to multiple factors like rise in insurance costs, inflationary hikes, liquidity crunch and forthcoming price increase due to BSVI implementation. To revive the slowing down auto sector, we also recommend considering offering ‘depreciation’ benefit on vehicles to individuals.”

Speaking on similar lines, Rahil Ansari, Head- Audi India said, “The taxes on cars have a huge impact on the customer’s buying decision whether it is an affordable or a luxury car. Moderation in taxes are much needed as this will lead to more volumes and in turn create larger tax revenues for the government in the long run, making it a win-win situation. Of course this has to go hand in hand with a consistent tax structure for the next five years, which will give us a good perspective to plan our products and investments effectively.”

Luxury cars constitute just over 1 per cent of the total Indian auto market and companies have been finding it hard to push sales after the rates were increased. Reduced GST rates will also help with better return-on-investment (ROI), making our market more lucrative for world class carmakers. Going forward, carmakers will also find India more viable to introduce latest and advanced technologies as good ROI promises more profit on the revenue invested.

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