As more and more car companies are trying to set up their manufacturing units in India, the recent rumour of increasing cess of high-end cars from 15% to 25% might affect the proceedings. The big car companies are keeping a close watch over any such announcement. The new rule, if implemented, will increase the effective tax rate on high-end cars to 53%.
In a recent interview, Ronald Folger, Mercedes CEO & MD for India stated his disappointment over the proposed policy change and added that the other brands operating in the same segment might draw themselves back from making big investments in India.
In his interview, he added that Mercedes is considered to be a product for the rich section of the society, however, of late, the company has offered its products to suit the upper-middle class segment. He also added that the vehicles made by Mercedes are not so costly, however, the crazy tax rate on them makes the price go significantly higher. According to him, the company accounts for 23% of the total cars sold every year, and that is possible because of proper taxation in various countries. He added that if tax on Mercedes cars is reduced, a lot more people will be interested in buying Mercedes in India too. He added that the base tax rate of 28% is way too higher compared to products in entry range and that there is no need of the extra cess that is levied.
According to Folger, Mercedes has held discussions with the government executives to request removal of cess from the high-end vehicles. This move according to him, will help the companies almost double the sale and government will be getting much more tax than what it is getting right now from the segment.