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Luxury car prices to go up significantly if 25% cess comes in force: Merc

Overall tax incidence on locally-assembled luxury cars came down from around 55% to 43%

Press Trust of India  |  New Delhi 


German carmaker on Monday said the prices of in India may go up by 5 per cent as compared to pre-era if the government hikes on such to 25 per cent.

The luxury car industry can contribute a lot in terms of job creation in the country on the back of "sustainable direction" on part of the government as far as prices are concerned, it said.

"In the worst case scenario prices will be higher than the pre-ear and all announcements that the will be a benefit to the people won't be true," MD & CEO Roland Folger told PTI.

When asked by how much the prices can go up, he added: "They can go up as high as 5 per cent as compared to pre GST prices and in this case around the country."

Folger said that the impact of price hike would be across the country due to "big alignment" of taxes across the states.

"If you apply the new 10 per cent plus, you are basically boosting everybody up by ten per cent so in some states it would mean significant increase," he added.

He said the company is currently in a "wait and watch" mode, a situation that has been the "central running theme for them" in the past two years.

Under the GST regime, large cars with engine capacity greater than 1,500 cc and SUVs with length more than 4 metres and engine greater than 1,500 cc attract of 15 per cent in addition to the top tax rate of 28 per cent.

The overall tax incidence on locally-assembled has come down from around 55 per cent earlier to 43 per cent in the Goods and Services Tax regime, which kicked in from July 1.

Several luxury car makers, including Mercedes, Audi and Jaguar Land Rover, have already reduced prices to pass on the benefit to customers.

The GST Council has now approved a proposal to hike on them from 15 per cent to 25 per cent. The decision on when to raise the actual cess leviable on the same will be taken by the council in due course.

Folger said the continued changes in policy is making it difficult for the company to discuss future business plans with its headquarters in Germany.

"It would (increase in cess) make our discussion with Germany very difficult because the business case won't work anymore and that's a shame because we have the potential to significantly increase jobs in this country," he added.

Doubling company's workforce in India is not out of question but it needs to have sustainable direction as far as prices are concerned, Folger noted.

"India has huge potential to create jobs in the luxury car segment...These jobs are not getting created...So if we only stare at issues like how much taxes can we make it is very very short sighted view unfortunately," he added.

First Published: Mon, August 21 2017. 19:01 IST