Consumers were expecting prices of cars to go up before the budget, but they didn't quite expect it would hit so hard. In the Union Budget 2016, presented in Parliament on February 29, finance minister Arun Jaitley gave the auto industry a jolt in the form of new cesses on all cars.
All cars, from entry-level hatchbacks right up to premium SUVs will become more expensive from April 1, 2016 due to a new infrastructure cess and a tax on luxury cars. The infrastructure cess varies from 1% to 4% depending on the body style and fuel type a car uses. A 1% infrastructure cess has been added to all cars that run on petrol, LPG or CNG. Diesel cars get hit with a 2.5% infrastructure cess, while SUVs already the most taxed vehicle segment, in the light of the pollution debate, now attract a 4% infrastructure cess. Besides this, all vehicles that have an ex-showroom price of Rs 10 lakh and above, attract an additional 1% infrastructure cess.
So for example if you are looking to buy a
Maruti Suzuki Alto STD, which costs around Rs 2.5 lakh (ex-showroom Delhi), you will have to pay 1 per cent more which is around Rs 2,500. Similarly, a
Maruti Suzuki Swift VDi (diesel) which currently costs around Rs 6.3 lakh (ex-showroom Delhi), will be 2.5 per cent more expensive, which is an increase of around Rs 15,750 on the ex-showroom price of the car. An SUV like the
Mahindra Bolero gets hit with a 4 per cent infrastructure cess and will be around Rs 30,000 more expensive than before for the mid variant. The
Honda City VX diesel variant prices will increase by Rs 40,000 owing to a 2.5 per cent tax on diesel cars and 1 per cent more for being a luxury car over Rs 10 lakh, while the petrol City VX would be more expensive by about Rs 23,000 because of the 1% cess for being a petrol car and 1% for being a luxury car by this definition. A luxury SUV like the
Toyota Fortuner will be around Rs 1.5 lakh more expensive with the new cess.
Consumers who had booked cars and were waiting for delivery, will now have to shell out the additional cash when they take delivery. This is likely to result in a dent in sales of new luxury cars and SUVs especially, as the tax impact is quite significant.