The luxury car market in India is one of the highly taxed segments and stakeholders have time and again indicated the need for a long-term stable policy to help the segment reach its full potential. Jyoti Malhotra, MD, Volvo Cars India believes that any and every industry needs “continuity in policies.”
Elaborating on the advantages of policy stability, Malhotra explained, “For any company and business, it’s very important to plan in advance. In the car business, the lead time is much longer. If we have to bring any car 2-3 years from now, we have no way of going back. We make a business case on today’s assumption. In India, uncertainties are what we always worry about. Then we have to adapt and manage it, which is very difficult.”
At present, luxury cars in India are taxed at 28 percent GST, plus an additional 20 percent cess on sedans and 22 percent on SUVs. In addition, in the case of a CBU (completely built unit) vehicle that has a cost insurance and freight value below $40,000 (Rs 32.98 lakh) attracts 70 percent customs duty. Semi-knocked down (SKD) units attract an additional duty of 35 percent, which means around 83-85 percent tax depending on the model.
This has been a case of concern for most luxury carmakers, who on the one hand see tremendous potential for growth in India, but the high taxation structure and comparatively low volumes (compared to global markets) lead to hesitation in potentially manufacturing vehicles grounds up in India. For context, luxury car sales in India are hardly about a percentage of new car sales, versus 15 percent in the United States market and around 17 percent in China. At its peak, the overall luxury car sales had touched 39,640 units in 2018.
