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Impact of GST on Cars And Other Automobiles in India

Narendra Kumar

| Updated: Feb 02, 2019 | Category: GST

Impact of GST

With the Introduction of GST, there is less burden of tax on the consumer as well as buyers end. In comparison to the excise and VAT with an average rate of 26.50 to 44%, the GST rates are dropped within the range of 10 to 28 %. And importers, dealers, manufacturers etc are eligible to claim GST, while in the past they were ineligible to claim VAT, excise duty. Therefore, the Impact of GST on cars and automobiles seems to be positive on buyers and sellers.

Further, in this blog we will compare the former tax levied on cars & automobiles with current GST rates.

What is the Impact of GST on cars and other Automobiles?

The effect of GST on different categories of vehicles can be explained as under:

  • In case of Small Cars below 1200cc

Earlier if you buy a small car below 1200cc (such as wagnor), you needed to pay approx 28% tax. Which included Excise 12.50%, auto cess  1.1%, VAT 14%, with additional road & motor vehicle tax (state-based).

But now the overall GST on cars below 1200cc amounts to 18%, which is 10% lower in comparison to the earlier tax regime.

  • In Case Of Mid-Size Cars Between 1200cc To 1500cc

In case of Mid-Size cars between 1200cc and 1500cc, you needed to pay 39% tax. It included Excise 24%, auto cess 1.1%, VAT 14%, with additional road & motor vehicle tax. While under the GST regime, the tax levied on these mid-size cars is 28%.

  • In the case of Luxury Cars above 1500cc

In the case of Luxury Cars above 1500cc, you needed to pay 42% tax. It included excise 27%, auto cess 1.1%, VAT 14%, with additional road & motor vehicle tax. While under the Impact of GST regime, you just need to pay 28% tax, which is 14% lower in comparison to the earlier tax regime.

  • In case of SUVs above 1500cc with greater than 170mm of ground clearance

In case of SUVs above 1500cc with greater than 170mm of ground clearance, you needed to pay 45%. It included Excise 27%, auto cess 1.1%, VAT 14% with additional state-based road tax & motor vehicle tax. While in the case of the GST regime the tax levied on these types of cars is 28%, which is 17% lower in comparison to the earlier tax regime.

  • In case of Electric Vehicles

In the case of electric vehicles (EVs), the tax levied on these vehicles was 20.5%. While in post GST scenario, the tax levied on these electric vehicles is 12%, which is 7.5% lower in comparison to the earlier tax regime.

“The overall Impact of GST on cars and automobiles industry is lesser in comparison to other sectors.  If we look at the past, it was a tough time for automobile industries bearing the brunt of demonetization and emission rules hitting the grounds. But with the implementation of GST. automobile industries have a sigh of relief”.

Now we will try to explain the Impact of GST in terms of the petrol and diesel capacity of the vehicles.

How GST is affecting the price of the automobile industry?

Let’s take a look, what impacts do these cars and automobiles have on their prices after the introduction of GST.

  • In Case of All Sub 4-metre Vehicles: Petrol Engines Less than 1.2 Litre

In India, the largest and most popular segment is sub-4-meter petrol cars with engines less than 1.2 litres. It covers few of the most popular cars we see on roads, such as Maruti Suzuki Alto, Maruti Suzuki Baleno, Maruti Suzuki Dzire, Hyundai Grand i10, Volkswagen Polo, Tata Tiago, Tata Tigor, Toyota Etios Liva, Ford Ecosport (with Ecoboost engine) etc.

The earlier tax levied on these sub-4-metre hatchback, sedans and SUVs was 31.5%, which was the collection of excise duty, value added tax and various other added tax. While the new GST rate levied on these types of vehicles is 29%.

So, ultimately the GST is amounting to 2.5% lesser tax rate, in comparison to the earlier tax regime.

  • In Case of All Sub 4-metre Vehicles: Diesel Engines more than 1.5 Litre

Sub-4 meter vehicles with less than 1.2 litres of diesel engines are also one the most commonly seen vehicles on the road. It includes Maruti Suzuki Vitara Brezza, Maruti Suzuki Dzire diesel, Hyundai i20 diesel, Mahindra TUV 300, Mahindra KUV 100, Ford Ecosport diesel, Tata Tigor diesel, Hyundai Xcent diesel etc.

In the earlier tax structure, the tax levied on these vehicles was 33.25% (Including Excise duty, value added tax and various other cess). While the current GST regime has lower down this taxable duty to 31%, which includes 28% of GST with an additional 3% cess on these types of vehicle.

Hence this has led to the lowering of 2.25% tax in this new GST regime.

  • In Case of All Sub 4-metre Vehicles: Diesel Engines Less than 1.5 Litre, Petrol Engines more than 1.2 litre

This category includes a small section of cars such as Ford Ecosport petrol with the 1.5-litre engine, Hyundai i20 1.4 litre automatic etc.

In the previous tax regime, without any sub-4-metre relaxation on the hatchbacks, subcompact SUVs and Subcompact sedans, the tax levied on these types of vehicles was 44.7% (Including excise duties, value-added tax, and various additional cess).

While the post GST structure has brought down this tax to a total of 43%. Which include 28% of GST and an additional cess of 15%. This ultimately made these types vehicle little cheaper by cutting down 1.7% tax.

  • In Case of cars larger than 4-meters (excluding SUVs): Petrol and Diesel engines irrespective of Displacement

This segment comprises the cars longer than the 4-meter mark, which has engines larger than 1.2-litres petrol or 1.5 litres diesel. This category includes the large share of vehicles, both sedans and hatchback such as Honda City, Maruti Suzuki Ciaz, likes of Mini 5-door and likes of bigger cars (Mercedes-Benz E-Class or S-class).

In the previous tax regime, the tax levied on these types vehicles was 51.6% (including Excise duties, value-added-tax, and various added cess). While in the new GST structure the above figure has come down to 43%. This includes 28% of GST and an additional cess of 15% over this category of vehicles.

This has given us the lowering of taxes for this category of vehicles by 8.6%, a positive note for all of us.

  • In case of SUVs larger than 4-meters: Petrol and Diesel engines regardless of displacement

All SUVs which have a mark of larger than 4-meter irrespective of their engine size falls in this category. It includes cars such as Mercedes-Benz GLC, Audi Q7, Tata Hexa, Mahindra Scorpio, Mahindra XUV 500, Ford Endeavour, Toyota Fortuner, Volkswagen Tguan etc. It is also one of the larger chunks hatchbacks and sedans we see on Indian road.

In the earlier tax regime, the tax levied on this segment was 55% (including Excise duty, value-added tax, and various added cess). While in the current GST regime the tax rate has lowered down to 43% (Including 28% of GST and additional cess of 15%).

This current GST structure has brought the relaxation of 12 % tax in comparison to the earlier tax regime.

  • In the case of Hybrid Cars

This is a very small segment of cars, which include cars such as Toyota Camry Hybrid, the Toyota Prius, Honda Accord Hybrid, Volvo XC90 T8, Lexus RX450h SUV, and ES300h sedan. For this category, the earlier tax structure levied the tax of 30.3% (including Excise duty, value-added tax, and various added cess.

While in this current GST structure, the tax levied on these segment of cars is 43% (including 28% GST and 15% of additional cess). This has led to the positive Impact of GST rate by 13.3%.

  • In Case of Electric Cars

In Indian market and roads, you must have seen the cars named Mahindra e20 and Mahindra eVerito. These are the electric cars. There are several others as well but these two are majorly popular. In an earlier tax regime, the tax levied on this segment of electric cars was 20.5%.

While in this current scenario of GST structure, the total amount of tax levied on these electric cars is only 12%. This has led to the drop down of 7.5% tax rate for this segment.

Conclusion

If we look at the overall scenario, there is definitely a positive Impact of GST on cars and automobile industries. In most of the segments of cars and automobiles; buyers are enjoying the lowering of taxes levied on these cars and automobiles. At the same time, sellers are able to claim GST which was not possible in case of Excise and VAT.

For more Information, please contact Enterslice.

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Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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