GST Reforms to Lower Luxury Car Prices by Up to 8% in India, According to Mercedes-Benz

Mercedes-Benz India’s leadership, specifically Managing Director and CEO Santosh Iyer, has shared that luxury car prices are expected to decrease by 5-8% due to the implementation of new Goods and Services Tax (GST) policies. Electric vehicles (EVs) will retain their current GST rate of 5%, leaving them unaffected. Meanwhile, internal combustion engine (ICE) vehicles, including strong hybrids, will see their prices drop. Iyer explained that under the previous system, combustion engine vehicles faced a tax burden of 48% to 50%, including cess, while strong hybrids were taxed at 43%. The new standardized rate will be 40%. The brand is actively updating its pricing structure, with the updated price lists projected to be released shortly. Iyer anticipates the price change to fall in the 6-8% range, with a late-night release targeted. He characterized the revised GST policies as “much simpler,” applauding the government’s clarity in maintaining favorable rates for EVs and grouping ICE vehicles and hybrids together. Despite the simplification, some concerns have arisen about dealer inventory, as older stock is taxed at higher rates, potentially resulting in losses of approximately Rs 2,500 crore for dealers. The finance ministry has acknowledged this issue and is anticipated to provide a resolution soon. Despite these challenges, Mercedes-Benz anticipates a “best-ever festive season,” supported by increased demand and lower prices. Iyer also cautioned that volatile exchange rates could diminish the impact of the tax cut. He cited the weak performance of the euro against the rupee, which impacts imported components. While prices will decline initially, he warned of potential upward pressure in the coming months if the exchange rate remains unfavorable.