GST might boost luxury car sales

Sale of luxury cars is increasing, with manufacturers predicting volume to grow in double digits in the coming time, thanks to the unexpected boost that goods and services tax (GST) will provide.

It was in 2016 that the sales of cars and SUVs priced between Rs 25 lakh and Rs 2 crore had fallen for the first time, because of the ban imposed on the sale of large diesel vehicles in and around Delhi in the earlier part of the year and demonetisation later.

However, for 2017, industry insiders predict that sales will swell as much as 15%, thus overpowering the overall automotive industry. Lobby group Society of Indian Automobile Manufacturers, however, predicts that sales would increase from 7 to 9%.

The reason why GST will boost the sale of luxury cars is the difference in taxes that have to be paid. Presently, luxury vehicles attract taxes as high as 55%, which includes taxes paid to the centre, state and the city.

However, once GST is implemented, these taxes would fall to 43%, including a 15% luxury cess.

Even though the change in taxes would be implemented from July 1, luxury carmaker companies decided to cut prices by as much as Rs 11lakh immediately after the GST Council announced the rates late last month. The gamble was played so that potential buyers who were waiting for GST to be implemented could be attracted.

"We have seen a lot of consumer interest as we passed on the GST benefits to end-customers... There has been a substantial increase in queries," Roland Folger, MD at Mercedes-Benz India, told ET. "2016 was a year of disruption and lost opportunities. The first five months of the year (2017) have gone on according to plan and there is no reason so far why we can't make up in 2017."

Audi India head Rahil Ansari also said that as per the feedback received from the market, "we do feel a comeback is imminent and growth may very well be in double digits."

"The benefits have been well-received and our dealers are experiencing higher footfalls and good conversions in sales," said Ansari.