The Goods and Services Tax Bill was a vehicle for the government to create a uniform tax structure throughout the country. This indirect tax replaced several cascading taxes levied by the state and central governments.
The GST rate applicable on a car is determined based on its classification and its fuel type.
The table given below mentions the tax rates applicable to each car segment before and after the GST regime was implemented:
|Segment||Engine capacity||Tax rate pre-GST||Tax rate post-GST||Difference between pre-GST and post-GST tax rate|
|Small cars||Less than 1,200cc||28%||18%||10%|
|Mid-size cars||From 1,200cc to 1,500cc||39%||18%||21%|
|Luxury cars||Above 1,500cc||42%||28%||14%|
The table given below shows the change in tax rate before and after implementation of GST for each car segment based on the fuel type:
|Car type||Engine type||Fuel tank capacity||Tax rate pre-GST||Tax rate post-GST||Difference between pre-GST and post-GST tax rate|
|Sub 4-metre cars||Petrol||Less than 1.2l||31.5%||29%||2.5%|
|Diesel||More than 1.5l||33.25%||31%||2.25%|
|Petrol, diesel||Petrol: More than 1.2l; Diesel: Less than 1.5l||44.7%||43%||1.7%|
|Larger than 4-metres SUVs||Petrol, diesel||Any capacity||55%||43%||12%|
|Larger than 4-metres non-SUVs||Petrol, diesel||Petrol: More than 1.2l; Diesel: More than 1.5l||51.6%||43%||8.6%|
Apart from GST, a cess will be applicable over and above the GST rate for automobiles. The cess rate for each car segment, alongside the respective GST rate, is given in the table below:
|Segment||Engine capacity||GST rate applicable||Cess applicable|
|Small cars||Less than 1,200cc||18%||1%|
|Mid-size cars||From 1,200cc to 1,500cc||18%||3%|
|Large cars||Above 1,500cc||28%||15%|
The introduction of GST has been beneficial for the end consumer, dealer, as well as the manufacturer. The impact of GST on the automobile industry for each segment is as given below:
Besides the vehicle, services and warranties offered by car makers are also taxed. These were not taxed earlier but are taxed under the GST regime. The new tax system focuses on the consumption state more than the origin state, which makes growth viable for the automobile industry.
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