GST cess on cars hiked to 25%: Carmakers say it will affect plans under Make in India

Top luxury vehicle manufacturers have criticised the government's proposal to hike cess on large cars and SUVs to 25 per cent from the current 15 per cent and said prices will surge above pre-GST levels.

Mercedes-Benz, Audi, BMW and Toyota Kirloskar Motor pointed out that frequent policy changes also make it risky for them to make long-term plans for India and that it will affect their sales and expansion plans under 'Make in India' initiative.

Mercedes-Benz India MD and CEO Roland Folger said in a statement that the move reiterated the need for a long-term roadmap for the luxury car industry, which has been at the receiving end of arbitrary policies.

"With this hike in cess, we expect the volumes of the luxury industry to decelerate. The current proposal of increase in cess, clubbed with the increased road tax rates, will take the effective consumer price much above the pre-GST scenario level," he added.

Audi India head Rahil Ansari also said they will be forced to re-evaluate their business plans. "This move unfortunately is against the spirit of liberal market dynamics. This proposed increase in cess will most definitely adversely impact the sales," he added.

Luxury vehicle makers had reduced prices on several of their cars and SUVs by up to Rs 10 lakh to pass on GST benefits to consumers. The finance ministry, in a statement, said that after introduction of GST, the total tax on motor vehicles (GST plus compensation cess) has come down vis-a-vis the total incidence in pre-GST regime.