Rationalise customs duty on imported luxury cars: Mercedes-Benz India CEO

A rationalisation of customs duties on imported luxury cars would help stimulate demand in the premium segment, leading to higher overall tax revenue for the government, according to Mercedes-Benz India Managing Director and CEO Santosh Iyer.

Besides, a more stable macroeconomic policy and improved fiscal management to arrest the ongoing decline of the rupee would help luxury car makers, which have been forced to increase prices due to rising input costs that, in turn, have had an impact on demand, Iyer told PTI when asked about expectations in the upcoming Union Budget.

Terming GST 2.0, under which rates were rationalised last year as "a very positive step", he said, "The same should happen for customs duties as well".

At present, imported passenger vehicles priced below USD 40,000 attract a basic customs duty of 70 per cent, and those priced above USD 40,000 are taxed at an effective customs duty of 110 per cent.

"This customs duty can be rationalised and brought under one slab...," he noted.

"These cars are not affecting the total mass market. They are operating in a different segment. Only 5-8 per cent of the cars we sell in India are facing customs duty and import duty. So, rationalising it, reducing it will make it simpler and help to grow, help get more taxes and get even better cars on the roads," Iyer added.

Stating that the current rupee depreciation has had an adverse effect, Iyer said, "A more stable macroeconomic policy, if there is a better fiscal management in the Budget that helps the forex movement and arrests the decline of the rupee, can help (improve) our demand".

Due to the adverse impact of rupee depreciation, Mercedes-Benz India would be looking to increase prices of its vehicles by 2 per cent every quarter in 2026, Iyer had said.

Overall, he said, India's improved intercity travel road infrastructure has driven luxury car demand and developing it further would be helpful for the industry.

"We would ideally like to see that more capex is allocated for roads. That helps for the overall economy and also the luxury car market," Iyer noted.