For better or worse: Here is how GST will affect car prices in India

On June 30 midnight, GST will come into force in India. Already – the one nation, one tax slogan – has received quite a lot of encouragement from all quarters of the nation. Interestingly, it remains to be seen how the industries will be taking it. We take a look at how the Indian automotive industry will be dealing with the price rise.

Needless to say, the Indian automotive industry already has its plans in place. In fact, part of the strategy has been to announce discounts and clear off stocks while in some cases, car manufacturers have stopped despatching cars to dealers so that the clearance is facilitated. Back in May the big German trio - Audi, Mercedes-Benz and BMW - had announced heavy price cuts. Dealers had advertised saying that get your cars at cheap rates before the GST sets in.

Here is what you need to know in case you haven’t bought a car when the pre-GST rates were prevailing:

With GST as we know the various indirect taxes will be removed and cars will be subjected to a standard 28 % tax rate and some additional cess. It will be decided by the segment the vehicle falls under, its engine size and type (petrol or diesel) and the size of the vehicle.

• Most vehicles fall under this category
• The GST is proposed in the rate of 1 per cent, 3 per cent, and 15 per cent.
• The car prices will be same across all states  but the state taxes such as road tax will be different
• Price difference between diesel and petrol cars will also widen
• In case of states where Octroi and Green cess is not applicable, the car prices will show an increase
• Registration charges and insurance are not included in the ex-showroom price
• In case of luxury cars, the reduction is applicable only on those cars which are made in India and not CBUs
• When the tax incidence is higher it is but natural that the hike will be borne by the customers

 

THE PRICES ON THESE CARS WILL INCREASE

Small cars

Sub-four metre cars with petrol engines not greater than 1.2 litre or a diesel engine not greater than 1.5-litre by displacement currently attract a 12.5 per cent central excise duty and 1 per cent infrastructure  cess. Another 12.5-14.5 per cent VAT is levied by states, taking the total tax incidence to 26-28 per cent. As per the GST rates revealed, small petrol cars will attract additional 1 per cent cess and

Hybrid cars no longer budget friendly

Government had stopped the subsidy to hybrid vehicles. Presently hybrids are being  taxed at 12.5% and after including the other taxes, it came to close to 24- 30 per cent. Now that hybrid cars are placed in the highest category of the GST at 43 per cent, they are bound to put off buyers.  This increase in tax slab will result in a price hike of up to Rs 1.5 lakh to Rs 45 lakh on cars like the Maruti Suzuki Ciaz hybrid, Toyota Prius and Camry hybrid.

Diesel cars

In cases of diesel variants in the small car segments, the 3 per cent cess will take total tax tally upto 31 per cent ( 28 per cent + 3 per cent). The cost of a mid sedan diesel  will increase by .5% to 1%

Used cars

According to a report in the Economic Times, industry experts said they expect the levy under GST to be the same for both used and new cars. That would mean a used-car buyer will have to cough up 20-33% more than the existing rates. They expect the cost in the second-hand market could increase by Rs 5,000-50,000 to as much as Rs 1lakh in the super luxury space.  

WHO BENEFITS

It is good news for SUVs

Interestingly, the larger SUVs will become cheaper by 2-3 per cent as the smaller cars become more expensive by 2-3 per cent. Cars with an engine capacity of more than 1500 cc which faced close to 49 per cent will now pay a lower rate of 43% post GST.

Mid-segment cars

Cars over 4 meters in length and with less than 1,500cc engines roughly have 41.5 per cent of tax on them but after the GST, it will be 43 per cent. They will attract 3 per cent cess. Mid sedan Petrol - prices will likely increase by 2 per cent to 2.5 per cent.

Luxury  cars

Will get cheaper and from the  44.5 per cent tax they earlier attracted it will be down to 43 per cent. The  maximum cess on luxury cars get capped at 15%, and with a GST rate of 28% A car in this category, priced upwards of Rs 50 lakh will experience a price cut to the extent of Rs  50,000 to Rs 2.50 lakh.