High taxes on luxury cars in India are understandable but there must be consistency in tax structures and policy as frequent changes hamper market sentiment and business plans.
High taxes on luxury cars in India are understandable but there must be consistency in tax structures and policy as frequent changes hamper market sentiment and business plans, according to a top official of Italian super sports car maker Automobili Lamborghini.
While some reduction in taxes could help grow the overall luxury car market in India, a consistent policy is needed to help companies make long-term plans and chart out their strategies, Automobili Lamborghini CEO Asia Pacific Matteo Ortenzi told PTI here. “We understand that we are in the luxury segment and taxation can be very high but…we would like to have consistency…I see a big challenge in the lack of consistency in taxation,” he said.
Ortenzi further said frequent changes create disruption which in turn disturb the market, adding “then you have to set again your own way to process the things”. “What is very important to us is the consistency of the policy that the government can apply in things, to have a long-term plan and strategy in order to be sure that we are able to set our strategy for delivery to the country and our pricing in the right way for the consumers here,” he said. Last year, when GST was implemented in July, luxury vehicles attracted base rate of 28 per cent with 15 per cent cess. Later on, in September cess on large cars was hiked by 5 per cent, taking the total GST incidence to 48 per cent while that of SUVs by 7 per cent to 50 per cent.
Ortenzi said such quick changes in tax structure disturbed the buying process of consumers. “When they hear about increase, the first reaction is to stop and wait and see what is happening and thus postpone the buying,” he said. According to Lamborghini India Head Sharad Agarwal, the super sports car segment in India, comprising 2-door models priced upwards of Rs 2.2 crore with power of 400 ps, could end up with a marginal growth to around 76-77 units as compared to around 70 units in 2017.
The segment, which stood at around 100 units a year in 2011-12, declined consistently with growth returning only in 2015-16. “This year there will still be growth but it would have been much faster growth if we didn’t have these tax changes in the last two years. It disrupted the entire market,” he added. The super sports car segment in India has the potential to go to three digits if the government policies and taxes remain consistent, Agarwal said.