Prices of luxury cars, including those of Audi and Mercedes, are likely to rise by up to Rs 10 lakh with the government on Thursday hiking the custom duty on CKD (completely knocked down) imports and levying social welfare surcharge on imported goods.

In the Budget for 2018-19, finance minister Arun Jaitley increased custom duty on CKD (completely knocked down) imports of motor vehicles, motor cars, motor cycles from 10% to 15%.

Besides, the government has levied a Social Welfare Surcharge on imported goods at 10% of aggregate custom duties.

As a result of the new taxes, German luxury carmaker Audi said that prices of models, ranging from A3 to R8, are expected to go up in the range of Rs 1.5 lakh to Rs 10 lakh.

"For the luxury auto sector, the Union Budget 2018-19 is disappointing and is against the spirit of partnership," Audi India Head Rahil Ansari said.

Increase in custom duty and introduction of Social Welfare Surcharge in lieu of an Education Cess, is going to definitely affect the prices again, which will further confuse the customer, he added.

"The market sentiment had only recently become stable after the introduction of GST Cess. The budget clearly lacks a focus towards the luxury auto industry, which otherwise would have given us a better clarity to plan our strategy for the India market for short and long term," Ansari said.

The luxury car manufacturers are undertaking several initiatives in terms of investment to make the dream of owning a luxury vehicle more realistic for all and therefore expect the government to support this industry, he added.

"The budget definitely needed an inclusive view for the luxury automobile industry which would have helped the industry to rebound and create more jobs," Ansari said.

Likewise, Mercedes Benz India MD and CEO Roland Folger termed the increase in the basic customs duty of auto parts, accessories and CKD components, clubbed with the new Social Welfare Surcharge as ‘unfortunate'.

"We believe it is going to impact the auto industry, the consumers and is also against the spirit of ‘Make in India'," he added.

Mercedes-Benz India, however, did not comment on expected price hike although company insiders said its CKD model range could witness a price hike between Rs 1.35 lakh to Rs 5 lakh.

"The auto industry which contributes 7.2% of the GDP is likely to be affected and further job creation might be impacted with this decision," Folger said.

Tata Motors owned Jaguar Land Rover and BMW India declined to comment saying they were studying details.

In the Budget presented today, duty on CBU (completely built units) imports of motor vehicles (trucks and buses) has been hiked from 20% to 25%.

The government also raised custom duty on specified parts/accessories of motor vehicles, motor cars, motor cycles from 7.5% to 15%.

Besides, imported duty on truck and bus radial tyres has been increased from 10 to 15%.

Justifying the move, Jaitley said there is substantial potential for domestic value addition in certain sectors, like food processing, electronics, auto components, footwear and furniture.

"To further incentivise the domestic value addition and Make in India in some such sectors, I propose to increase customs duty on certain items," the finance minister said.