With the GST Council’s August 5 decision to increase the cess on luxury vehicles by another 10% to bring the overall duty at par with the pre-GST rates, bookings for such vehicles have seen a spurt. Prior to GST, excise and other state-level levies for such vehicles added to around 53%, which came down to 43% under the GST regime. This made luxury vehicles cheaper and at par with other bigger vehicles thus seeing a spurt in their sales. To rectify this anomaly, the Council decided to put bigger and luxury vehicles in a separate bracket by hiking the cess on those by another 10%. However, this hasn’t been notified yet and may soon be done through an Ordinance. Industry sources said while sales had increased in July due to lower duty, in August it is expected to go up further as consumers have advanced their decision to buy such vehicles before their prices rise again.
For instance, luxury car maker Toyota has seen bookings and enquiries rising by 30-40% over July due to the news that such vehicles will soon become dearer due to price hike. “We have seen 30-40% increase in bookings in August which will be delivered over the next two months. As a result, the waiting period on Innova and Fortuner have increased to almost two months. With this sudden announcement, the customers want to advance their purchase as prices will increase further in the future,” said N Raja, Director and Senior Vice president, sales and marketing, Toyota Kirloskar.
Both Innova and Fortuner comprise more than 80% of the total volumes of the company in India. Some of the dealers of the company have also stopped taking bookings for these vehicles. In July, the sales volume of the company increased by 43% y-o-y to 17,750 units. “Enquiries for Innova and Fortuner have almost doubled in the last few weeks since customers know that prices will increase further and may be more than the pre-GST levels. So they are treating this as a discount scheme,” said an executive in a Toyota showroom in Delhi.
Apart from Toyota, other automobile manufacturers like Mahindra and Mahindra and Hyundai have also seen a similar uptick in demand for bigger vehicles in their respective dealerships. “With increasing bookings in August we are fine till October but after the festive season is over from Noverber and December it will be very crucial. We do not know how the market will react to this sudden revision in taxes,” explained Raja. In the January-July period, Toyota’s domestic volumes increased around 8% y-o-y.