Nirmala Sitharaman Makes Luxury Cars Cheaper, But What About Middle-Class Car Buyers?
In a move that has left many scratching their heads, Finance Minister Nirmala Sitharaman recently announced a significant reduction in import duties on luxury cars priced above $40,000. The tariff has been slashed from 125% to 70%, making it easier for high-end buyers to park a Mercedes-Benz S-Class or a Porsche 911 in their garages. Meanwhile, the average Indian car buyer—who is still paying hefty taxes on mass-market cars—might be wondering: Where’s our discount?
A Windfall for the Ultra-Rich?
Luxury car enthusiasts must be thrilled. The price of a fully imported BMW 7 Series or a Range Rover Autobiography could drop by ₹30-40 lakh overnight. Even ultra-expensive models like the Porsche 911 or the Audi RS7 might see significant reductions, making them more “affordable” (if you can call ₹1.5 crore affordable).
While luxury brands are celebrating, let’s not forget the irony here: a ₹2 crore car is getting a price cut, but the average Maruti Swift buyer is still paying 28% GST + cess. Even a humble Hyundai Creta is taxed so heavily that nearly half its cost goes into government coffers. For budget-conscious car buyers, the price of their dream car remains unchanged—firmly out of reach.
What About the Common Buyer?
India is one of the most heavily taxed automobile markets in the world. A middle-class family looking to buy a new car pays more in taxes than in many developed nations:
A sub-4m petrol car (like a Swift or Baleno) is taxed at 29-31% (GST + cess).
A larger petrol or diesel SUV (like the Hyundai Creta or Mahindra XUV700) faces 43-50% taxation!
Electric vehicles (EVs) get some relief at 5% GST, but the benefits mostly apply to high-end models like the Kia EV6 or Audi e-tron.
The question is obvious: Why is the government in a hurry to make luxury cars cheaper while keeping everyday cars expensive?
A Tale of Two Buyers
Let’s compare two hypothetical buyers:
1. Mr. Sharma, a middle-class professional, is looking to buy a new Maruti Brezza, priced at ₹12 lakh. Thanks to GST and cess, he is effectively paying ₹4-5 lakh in taxes.
2. Mr. Mehta, a businessman, is eyeing a Porsche Taycan, currently priced at ₹1.8 crore. Due to the new tax cut, his car might now cost only ₹1.4 crore—a direct savings of ₹40 lakh!
So, the government’s message seems clear: If you want to buy an ordinary car, keep paying high taxes. But if you’re rich enough to afford a Lamborghini, congratulations—here’s a tax cut!
The Justification: Attracting Foreign Carmakers
Government officials argue that this move will encourage foreign luxury brands to expand in India, bringing investment, jobs, and better products. While that may be true, it does little for the vast majority of Indian car buyers who just want a reliable, affordable vehicle.
If the real goal is to promote foreign investment, why not reduce taxes on all cars, encouraging both local and international manufacturers to compete fairly? Right now, a mass-market car buyer is subsidizing a billionaire’s Bentley.
What Could Have Been Done Instead?
Instead of making expensive cars cheaper, the government could have:
Reduced GST on mass-market cars to make vehicles more affordable for millions of Indians.
Cut fuel taxes, which remain among the highest in the world, making car ownership costly even after purchase.
Incentivized hybrid vehicles, which are taxed as high as petrol cars despite being more fuel-efficient.
But no—apparently, the biggest priority was making imported Porsches and Land Rovers more accessible!
The new policy is great news for the ultra-rich but does little for the average Indian. Until broader tax reforms happen, the message is clear: if you’re buying a Ferrari, the government has your back. But if you just want a new Swift or Creta? Keep paying up.