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  • How The Car Type Affects GST And Motor Insurance Premium

    In an average Indian household, buying a car still remains one of the most cherished dreams. So when one decides to buy a car, he/she would be looking to get the best deal out there. Each individual has extremely specific needs. The key factors to consider when buying a car would be its price, the size of the family, the mileage it offers, and fuel type. In case one is inclined for a second-hand purchase, the age of the vehicle and the previous ownership details may hold prime value.

    The actual process of narrowing down on a suitable model can be more time-consuming than one would assume, largely due to the availability of several makes and models in the market. For the uninitiated, terms such as sedan or hatchback would only indicate the body type of the vehicle and would not probably hold as much importance as the mileage or the fuel type. However, you should note that the body type of the vehicle has a bearing on its cost and also its motor insurance premium. Hence, it could play a significant role in determining whether the purchase would fit within your budget.

    Here, we take a look at the different types of cars available in India, based on their body types. We also analyse how the cost and insurance premium varies across different models.

    Car Type and GST

    Car Body Styles:

    Some of the most notable car body styles in the Indian automobile scene are as mentioned below:

    1. Sedan - These cars are designed for comfortably seating five passengers. The trunk size of sedans are bigger; hence a large amount of luggage can be carried within. The overall dimensions of the vehicle are also larger, i.e., length, width, wheel base, and height. The car has a three-box configuration and several sub-types such as fastback, notchback, compact, etc. Some of the most popular sedans in the Indian market are Hyundai Verna, Honda Amaze, Maruti Suzuki Swift Dzire, Ford Fiesta, and Honda City.
    2. Hatchback - Hatchbacks are smaller cars with four doors and a boot. These cars can seat four passengers comfortably and the boot space can be used for storing one or two bags. The design of a hatchback determines its actual size. The hatchback could be a super mini or a larger one, based on the size of the interiors and the luggage space. These cars are suitable for use in the cities in heavy traffic conditions. These can also be parked easily and they provide good mileage. Some examples of hatchbacks are Hyundai i10, Maruti Suzuki 800, Tata Indica, Mahindra Reva, and Tata Nano.
    3. MUV - A multi-utility vehicle (MUV) or multi-purpose vehicle (MPV) is usually referred to as a people carrier. These vehicles offer increased space and comfort for the passengers, as there are two or three rows of seating. The doors are also larger than most cars and the third row can be reconfigured, if needed. Some of the notable MUVs in the Indian automobile market are the Maruti Suzuki Eeco, Maruti Suzuki Omni, and Datsun GO+.
    4. SUV - A sports utility vehicle (SUV) is a big vehicle that has a body-on-frame chassis. The ground clearance is high and off-roading capabilities of the vehicle are noteworthy. However, there have been several soft-roaders and off-roaders introduced under the SUV classification. Examples of off-roader SUVs seen in India are Mahindra Scorpio, Mahindra Thar, and Land Rover Discovery Sport. Some of the notable soft-roader SUVs are Renault Duster, Honda CR-V, and Skoda Yeti.
    5. Crossover - A crossover is a vehicle that is a combination of an SUV and a hatchback. These vehicles have soft-roading capacities. Crossovers also have unibody construction unlike SUVs that have a body-on-frame platform. Some examples of crossovers are Volvo S60 Cross Country, Maruti Suzuki S-Cross, and Hyundai i20 Active.
    6. Convertible - A convertible is also referred to as a roadster or a cabriolet. The roof of such a car can be moved to allow open air driving, if needed. The roof can also be shifted for enclosed driving. These cars have soft folding roof or retractable hardtop for this purpose. Some of the notable convertibles are Audi A3 Cabriolet, Mercedes-AMG SLC 43, and Ferrari California T.
    7. Coupe - A coupe is a closed two-door car with a roof that is fixed in place. It has a sporty appearance and two seats inside. The rear is also smaller than average cars. Nowadays, car manufacturers often refer to cars with four doors and a sporty appeal as coupes, smudging the definition a bit. The Ford Mustang, Mercedes-Benz GLE Coupe, and Audi R8 fall under the category of coupes in India.
    8. Van - Vans are vehicles that are designed for offering flexibility in using the interior space. It can have a varying number of seats and even luggage space. The vans designed for commercial purposes are Tata Venture, Tata Ace, etc.
    9. Wagon - A wagon is a combination of a sedan and a hatchback, with the added advantage of greater space behind the second row. This space can be utilised for affixing extra seats or for storing luggage. The dimensions of this vehicle are larger than that of a hatchback. Some examples of wagons are Mahindra Quanto, Maruti Suzuki Wagon R, and Maruti Suzuki Ertiga.
    10. Jeep - A Jeep is similar in design to an MUV, but there is an option of buying it with a soft top or a hard top. A jeep is suitable for cross country usage and for adventure drives. Such vehicles have the utility of a sports car with the price tag of an MUV. The Mahindra Thar, Maruti Suzuki Gypsy, and Mahindra Jeep are examples of this type of vehicle.
    11. Pick up vehicle - A pick up vehicle or van is essentially an MUV with space for luggage. The design is a combination of that of a commercial pick up van and an MUV. The vehicle seats five passengers and would weigh around 800 kg. Tata Xenon XT is an example of a pick up vehicle.

    GST And Cess On Car Models:

    After the GST implementation, the rate of levying GST on mid-size cars has become 45% (inclusive of cess at 2%) and that on SUVs is 50% (inclusive of cess at 7%). Large cars are levied GST at 48% (inclusive of cess at 5%), a rate that falls in between these two values.

    Cars that have length exceeding 4,000 mm and with ground clearance of 170 mm and more will be levied GST at the rate of 50%.

    The prices of cars had dropped immediately after the implementation of GST. The tax rates under GST were lower than the pre-GST days when the central and state taxes were combined. The drop in price was seen to be around Rs.3 lakh for some models. Subsequently, the GST Council raised the cess on mid and large cars and SUVs.

    Under the GST tax regime, cars fall in the highest tax slab of 28%. The GST cess is levied over and above this taxation.

    • Small petrol cars with engine capacity below 1,200 cc are now charged 1% cess (over and above 28% GST).
    • Diesel cars with engine capacity below 1,500 cc are levied cess at 3% (over and above 28% GST).
    • Hybrid cars and vehicles used for transporting up to 13 passengers are charged GST cess at 15% currently.

    The Importance Of Car Insurance:

    The type of car has a bearing on its insurance premium. A comprehensive car insurance cover offers protection to the insured vehicle from natural and man-made disasters, theft, accidents, in-transit damages, etc. It is also possible to mix and match the add-on covers in car insurance and amplify the coverage offered by a comprehensive policy.

    When buying car insurance, you will find that the make and model of your car and its engine capacity are key factors that determine the premium. For instance, the third-party liability premium for car insurance is completely based on the cubic capacity of the vehicle. This premium amount is a fixed value (that varies by engine capacity) and is used across the industry as a standard.

    The latest guidelines published by the IRDAI in this regard are as follows:

    Vehicle’s engine capacity Third-party liability premium
    Not more than 1,000 cc Rs.2,055
    More than 1,000 cc but not exceeding 1,500 cc Rs.2,863
    More than 1,500 cc Rs.7,890

    It is also found that sports models of cars and those that are branded as luxury vehicles will attract higher premiums as they are considered to bear high risk for the insurers. Additionally, cars that have alternative fuel systems such as CNG/LPG kits will attract higher premiums.

    When buying car insurance, it is advisable to read through the policy documentation exhaustively, so that you are well aware of the intricacies in the fine print. This will save you a lot of effort at the taxing time of a car insurance claim.

    GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017

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