Customers make a beeline for luxury cars, SUVs before cess kicks in

After an increase in cess, these cars will be taxed at 53%

The Goods and Services Tax (GST) Council's August 30 announcement that the cess levied on luxury cars and sports utility vehicles (SUVs) seems to have taken some excitement away from carmakers. After the proposed cess increase, the cars will be taxed at 53 per cent. This would add even more to the price of big cars than the rollout of GST did two months earlier.

However, following the announcement, people planning to buy such cars in the near future are increasingly advancing their purchase. Since the announcement, companies have seen an increase in footfalls and inquiries. “For sure, we are seeing an increase in inquiries and customer bookings. For them, it’s the best time to buy before the cess hike kicks in. Customers looking to buy cars during the coming festive season or during the next two or three months are now doing so right away. We expect this month to have better sales on account of people advancing their festival purchase before the cess increase implementation. However, it’s a temporary increase in sales, so not really a positive from a larger perspective,” said Rahil Ansari, Head, Audi India.

According to experts, this is the best time to make car purchase decisions as the prices for luxury cars will increase up to 7 per cent. For mid-segment cars, the hike in prices is likely to be a little lower, at 4 per cent. The anticipation has ushered the pre-buying tendency among car buyers. 

Mumbai based Mercedes-Benz dealership, Autohanger today reported a marginal increase in footfalls in their dealerships and a 15 per cent preponement in purchasing by their customers. Customers who were to make purchases during festive seasons have been hitting dealerships months before to save some extra penny that they will have to spend post levy of additional cess.

Mercedes E220d, which is company’s bestseller is likely to witness a surge in prices by Rs 3.88 lakh. Currently, the car is sold at Rs 55,52,390 ex-Showroom Mumbai and this price will increase to Rs 59,40,669 following the increase in cess. The on-road price will too have a cascading effect since insurance and registration charges are calculated on ex-showroom prices. Hence, the on-road prices for the respective model can increase to a high of about Rs 6 lakh.

Luxury carmakers like Mercedes, Audi and Jaguar LandRover had earlier passed GST benefits to the customers prior to GST roll out and they have incurred losses on such a strategy. Companies had made it clear that they are not in a position to offer heavy discounts in this financial year. This will decrease the sales during the festive season heavy discounts are not to be expected, apart from the cess that will kick in soon.