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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% |
SUVs | Above 1,500cc | 45% | 28% | 17% |
Electric vehicles | NA | 20.5% | 12% | 7.5% |
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% |
Electric cars | Electric | NA | 20.5% | 12% | 8.5% |
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.
The additional 15% cess that was going to be imposed on specific categories of second hand vehicles shall not be chargeable. Certain categories of larger vehicles which come in larger dimensions and a larger engine capacity will attract a GST of 28% plus 15% cess. This comes up to a total of 43%. As per a notification issued by the government, a flat rate of 28% will be levied on the dealer’s margin when a pre-owned car is sold. The tax structure will come inbuilt into the price of the vehicle which the customer has to pay. Industry experts say that it is not a simple decision to make as tax rates could vary from one state to another.
24 July 2017
The recently launched Xcent facelift and Grand i10 have recently been benefited from the new GST rates. The Tuscon, a mid-sized SUV, has become cheaper by over 1.12 lakh while the ex-showroom price of the Hyundai Grand i10 has been reduced by over Rs.6,000. The revision in prices of these vehicles have already been updated on their main website. Hyundai's line-up of vehicles have observed marginal differences in their prices across all states in the country. Other major automobile manufacturers like the Nissan, Skoda, Maruti Suzuki, Tata Motors, JLR, BMW, and Honda have all passed on the benefits of GST to their customers to improve customer relations and maintain their customer base.
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