India Hikes Taxes on Luxury Cars, SUVs

India, which introduced a nationwide goods and services tax last month to replace the country’s complex array of local and national taxes, has increased the rate on certain luxury vehicles from 43% to 53%.

GST taxes most cars at 28%, with a 15% surtax for some luxury models. That represented a welcomed discount for some luxury carmakers. Under the country’s former tax system, some high-end vehicles could attract combined levies equal to 55% of the car’s selling price.

But last Saturday a special panel set up to implement the GST decided to raise the 15% surcharge to 25% for vehicles more than 4 meters (13.1 feet) long and powered by engines displacing at least 1.5 liters. The move is expected to be finalized through an amendment to the GST law in a few months.

India’s luxury car sector accounts for roughly 30,000 sales per year, or about 1% of the total market volume. But European luxury brands such as Audi, BMW and Mercedes-Benz say the new tax rate may disrupt planned product launches and curb their investments in models for India.

Roland Folger, who heads Mercedes-Benz India, grumbles that the luxury car industry has been “at the receiving end of arbitrary policies” in India. He urges lawmakers to develop a long-term roadmap.