Are Mid-Sized Sedans and SUVs More Expensive After Cess Hike?

Prices of small cars won’t go up, but all mid-size sedans, luxury cars and SUVs will see prices rise considerably.

The cess on SUVs has gone up by 7%.  

(Photo: The Quint)

Two, five, seven... That’s the increase in cess, in percentage, that the government has slapped on mid-size sedans, luxury sedans, and SUVs, respectively. This hike in cess almost takes the prices of some of these cars back to pre-GST levels, and brings back differential taxation for cars, after GST bought about a uniformity in taxes.

There has been no hike in cess on small cars, electric vehicles and hybrids (some concession, finally).

Also read: Most Cars, Bikes and SUVs Cheaper After GST

The differential tax rates penalise SUVs the most, which obviously has SUV makers and manufacturers of luxury sedans crying foul.

“The decision to increase the cess yet again is very unfortunate, and completely overlooks the contribution we make to the industry and to the economy. Although the contribution in terms of volume of luxury car industry is very low, our value wise contribution is much higher, and that has immense growth potential in the future, had there been fair taxation. However, by continuous taxation of the segment, the overall revenue generation is going to be hurt, as the increase in price is going to hurt demand. Now, with this increase in cess, the prices are bound to leap back to the pre-GST regime, in some cases higher than the pre-GST regime, thus negating the benefits of GST regime altogether. ”

Roland Folger, MD & CEO, Mercedes−Benz India

Mercedes-Benz India has the largest portfolio of cars in the country.  (Photo: The Quint)

Mercedes-Benz India has the largest portfolio of cars among all automakers in India. All of its cars though, are hit by either the 5 percent increase or 7 percent increase, which takes the total incidence of tax up to 50 percent in the case of SUVs, which was 43 percent earlier. It’s still slightly lower than the 55 percent which was prevalent in the pre-GST era.

The GST implementation on 1 July removed the cascading impact of multiple taxes applicable in the pre-GST regime, which we understand was one of the primary objectives of the Government. The removal of the cascading impact enabled the Industry to reduce prices and benefit the consumer as well as expand the market, which had been declining because of high taxation. The expansion in demand would have enabled further investments in local manufacturing and job creation across the supply chain, including more people in factories, showrooms, workshops and logistics service providers. 

Rohit Suri, President and Managing Director, Jaguar Land Rover India

Most car makers though are heaving a sigh of relieve that the hike is not as much as anticipated, as it is still lower than the pre-GST levels. However, for you, the car buyer, the impact could be quite a bit, depending on the car you buy.

All cars that do not conform to the government’s definition of a small car (under 4 metres in length, with a diesel engine below 1,500 cc or petrol motor below 1,200 cc) have seen a hike in cess. Mid-size sedans like the Maruti Ciaz and Honda City will see a 2 percent hike in cess, increasing prices by about Rs 15,000 to Rs 20,000.

Mahindra, which has mainly SUVs in its portfolio, is among the most affected. (Photo: Mahindra)

SUVs like the Mahindra XUV500 or Mahindra Scorpio will see a 7 percent hike in prices. This means prices can go up between Rs 60,000 to Rs 80,000. The Jeep Compass also gets a hike of 7 percent, and hence, will see prices go up by about Rs 1,50,000 on the top-end variant.

Is there any hope of some concessions? Well, with the festive season around the corner, you may get a few discounts, but nothing substantial. It looks like the best time to have bought a car this year was between 1 July and 9 September.

Also read: Car Launches During Diwali to Make the Festive Season Even Better

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