GST revision to make Jeep Compass 1.5 lakh more expensive

The Jeep Compass, which launched at Rs 14.95 lakhs may start at Rs 16.44 lakhs

July 1st saw car makers drop prices across the range. Except the hybrid products, all other vehicles became cheaper, by a varying margin. Keeping this in mind, the Jeep Compass was launched at a cracking price of Rs 14.95 lakhs, ex-showroom for the base petrol version. While we were expecting competitive pricing, this has taken everyone by surprise. However, this joy maybe short lived.

On 5th of August, the Finance Ministry tweeted that the there maybe an increase in additional cess for luxury vehicles and SUVs from the current 15% to 25%. Currently, the taxation on luxury cars and SUVs is 28% + an additional 15 %. The 15% is what is going to be increased to 25%, according to the reports. This will result in a total tax of 53%, as opposed to the 43% which happened post the implementation of GST. Overall there will be a reduction of price by 1.58% compared to pre-GST pricing when it comes to SUVs.

This effectively means that there will be a 10% increase in the existing prices of the most vehicles. The Jeep Compass, which has been launched at Rs 14.95 lakhs will then start at Rs 16.44 lakhs while the top spec variant which is now Rs 20.65 lakhs will set you back by Rs 22.71 lakhs.

The proposal for the increase has already been made and it will be officially announced later next month, when the actual meeting takes place. These is no clarity on when the new taxation policy will come into effect but reports suggest it could happen as soon as next month itself.

Currently, the waiting period for the Compass has shot up to a few months, with the company getting over 5,000 pre-bookings even before the price announcement. While the Compass was launched on the 31st, Fiat began dispatching vehicles to dealers much earlier and that resulted in a dispatch of 935 units in July. With the waiting period now extending into a few months, this price hike could result in some people having to spend more for their Compass. For that matter, all other luxury vehicles will see an increase in prices.

Here is what Mercedes MD and CEO had to say regarding the same:

We are highly disappointed with the decision. We believe this will be a strong deterrent to the growth of luxury cars in this country. As a leading luxury car maker, this will also affect our future plans of expansion under ‘Make in India’ initiative, which aims at making and selling world-class products in India, with the latest technology for end consumers. We feel deprived as the leading manufacturer of luxury cars in India, who has been championing ‘Make in India’. This decision will also reverse the positive momentum that the industry wanted to achieve with the introduction of GST. With this hike in cess, we expect the volumes of the luxury industry to decelerate, thus offsetting any growth in the potential revenue generation, that could have come with the estimated volume growth.

This decision once again reiterates the need for a long-term roadmap for the luxury car industry, which has been at the receiving end of arbitrary policies. The constant shift in policy makes our long-term planning for the market highly risky, and we think this would only have an adverse impact on the country’s financial ratings. By making better technology more expensive, the Government is causing more damage to the environment and slowing down the overall growth pace of the country’s economic growth, which it is striving to achieve.