Budget 2026: Luxury car makers seek excise tax reforms to boost demand for premium cars

Ahead of Budget 2026, Santosh Iyer, Managing Director and CEO of Mercedes-Benz India, has called for rationalization of customs duties on imported luxury cars. He said this could boost demand in the premium segment and ultimately increase government tax revenues.Speaking to PTI, Iyer highlighted the challenges faced by luxury car makers due to rising input costs and continued depreciation of the rupee, which have necessitated price hikes and affected demand.

Also read: Luxury car market set to grow in single digits by 2026 amid exchange rate pressure and entry-level slowdown: Santosh Iyer, CEO of Mercedes-Benz

Terming GST 2.0 – which saw rates rationalized last year – “a very positive step,” he said. “The same should also happen for customs duties.”

Currently, imported passenger cars priced below $40,000 are subject to a basic customs duty of 70 percent, while vehicles above $40,000 are subject to an effective duty of 110 percent. “These customs duties can be rationalized and brought under one roof,” Iyer suggested.

He added, “These cars have no impact on the overall mass market. They operate in a different segment. Only 5 to 8 percent of the cars we sell in India face customs duties and import taxes. So rationalizing them and reducing them will make it easier and help grow, help get more taxes and get even better cars on the road.”

Iyer also highlighted the role of macroeconomic stability in supporting the luxury car market. “A more stable macroeconomic policy, if there is better fiscal management in the budget that helps the currency movement and arrests the rupee’s decline, can help (improve) our demand,” he said. Earlier, Iyer had indicated that due to the depreciation of the rupee, Mercedes-Benz India plans to increase car prices by 2 percent every quarter through 2026.

Highlighting the impact of infrastructure development on luxury car sales, he said: “We would ideally like to see more investment allocated to roads. That will help the economy as a whole and also the luxury car market.”