Be prepared to shell out more for Ciaz and Creta.
All cars which are not classified under ‘small cars’ will see a significant jump in prices when the GST Council revises rates. The Finance Ministry has proposed to increase cess to 25 percent from the present 15 percent for luxury cars and SUVs.
While the government has not clarified the effective date of implementation of the increased cess market, watchers say it could be brought into effect within the next month.
“The decision on when to raise the actual cess leviable on luxury cars and SUVs will be taken by the GST Council in due course,” an official, who did not wish to be identified, told Moneycontrol. The higher cess is unlikely to come into effect before September 9, the next date for the GST Council's meeting in Hyderabad.
Popular sedans like Honda City and Maruti Suzuki Ciaz, SUVs like Hyundai Creta and Toyota Fortuner, entire luxury car range of Mercedes-Benz to Volvo will see the jump in prices. Prices of Jeep Compass which Fiat positioned attractively at Rs 14.95 lakh will also rise.
More than 50 models of cars and SUVs will be hit by the sudden change in prices. These models are those which have a petrol engine more than 1.2 litre and diesel more than 1.4 litre and are longer than 4 meters.
Under the current price regime all such vehicles saw a price drop in the range of 10-15 percent as excise, sales tax, VAT and other taxes like Octroi got subsumed in GST.
Companies such as Mercedes-Benz, Audi and BMW even jumped the gun to pass on the benefits even before GST was officially launched on July 1. Mercedes-Benz, the luxury car market leader, for instance, cut prices by up to Rs 7 lakh in the final week of May.
The proposed rise by 10 percent is considered as a significant increase as manufacturers usually hesitate to increase prices by even 2 percent. No manufacturer will absorb the price hike and will pass on the rise to the consumer which will thereby hurt sales.
The government’s move to increase cess comes at a time when the market readies to enter the festive demand phase which generates more than 50 percent of the yearly volumes.
With the increase in cess, large SUVs will effectively return to the same tax level which was in practice before GST implementation. While companies hesitated to predict the actual rise in prices they hope that the Finance Ministry lays down a clear definition for luxury cars and not club mass market car makers like Maruti Suzuki, Tata Motors, Hyundai and Mahindra with them.
“The automobile sector is repeatedly getting targeted on the issue of taxes. We welcomed GST on July 1 thinking it will lead to simplification to operations but we are back to the same sentiments as pre-GST days. This will once again create an anomaly in demand as buyers will once again flock to showroom to avoid the hike”, said an executive from a leading car maker.
List of luxury cars and SUVs that are likely to get more expensive
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