I recently had to purchase a mid-sized SUV for my parents who are stationed in the hilly terrains of Wayanad, Kerala. In a short, four-day trip back home, we were able to narrow it down to the Renault Duster AWD. A dilemma which we had, and I am sure that many a household has faced – is the effect that GST – Goods and Service Tax (which is scheduled to be implemented from July 1, 2017) would have on new car prices. Which segment of cars would witness a shoot-up in prices? Which are the models which will see a drop after the GST comes into effect? After some research, we decided to go ahead with the Renault Duster, which falls under the mid-size segment, for we figured out that the price difference will be minuscule in the state of Kerala. This prompted me to pen down a detailed blog about the same. Hope I do not bore you with the numbers!

 

As GST will replace multiple taxes levied under the existing taxation system – to get the preview of the impact of the same on a specific car please allow me to break down how cars are segmented in India:

  1. Small cars – Those under 4 metres in length, with an engine capacity below 1200cc for petrol and 1500cc for diesel cars.
  2. Mid-size cars – Those which extend beyond 4-metres in length but, do not have a petrol or a diesel engine with a capacity over 1500cc.
  3. Luxury Cars – Those over 4-metres, with an engine capacity of more than 1500cc.
  4. Sports Utility Vehicles (SUVs) – Those cars which are over 4-metres in length, have 170mm of ground clearance and an engine capacity of over 1500cc.

These are the existing taxes levied and the proposed GST on the above-mentioned segments of cars.

Existing taxes leviedProposed GST
BaseCessNet
Small CarsPetrol26% – 34%28%1%29%
Diesel27.5% – 35.5%28%3%31%
Mid-size Cars40.5% – 48.5%28%15%43%
Luxury Cars44.5% – 51.5%28%15%43%
SUVs47.5% – 54.5%28%15%43%

Allow me to break down the segment-wise existing tax structure to see how complicated it was.

Small cars – The cars that fall in this segment attract  (as per under the current taxation system) – 12.5% Excise Duty, 12.5%-14.5% of VAT, 1% & 2% Infrastructure Cess for petrol and diesel cars, respectively.

Mid-size cars – Excise Duty – 14.5%, VAT – 12.5%-14.5% and Infrastructure Cess – 4%.

Luxury cars – Excise Duty – 27%, 14.5%, VAT – 12.5%-14.5% and Infrastructure Cess – 4%.

SUVs – Excise Duty – 30%, 14.5%, VAT – 12.5%-14.5% and Infrastructure Cess – 4%.

VAT rates fluctuate as it is levied differently in each state. Additionally, applicable to all the above segments, across India is – 1% Luxury Tax on cars which cost above Rs 10 lakh (ex-showroom). Select states also charge an octroi of 4% on all cars and to round it up, Delhi charges a 1% Green Cess on diesel cars with an engine capacity of over 2000cc.

Also, it is likely that the lower excise duty charged on hybrid cars such as the Maruti Ciaz SHVS, Toyota Camry Hybrid and the Toyota Prius at 12.5%, instead of the 24% and 27% will not be available once the GST comes into effect.

Hope you get an idea of how complicated the existing tax structure was. It would now be replaced by the GST in which – all segment of cars fall under the base slab of 28% and varying cess slabs of 1%, 3% and 15%. Quite a straightforward method, isn’t it?

Too many figures? To gauge the exact fluctuations in prices on a specific car in each segment, allow me to pick a car from the five varied tax brackets. All prices mentioned are ex-showroom, Delhi and there are no octroi taxes levied in Delhi. Green Cess is applied on diesel vehicles above 2000cc.

Small Cars (Petrol)

Let’s take India’s best selling hatch – the Alto 800 VXi for reference in this segment, which registers the largest volume of passenger vehicle sales in the country.

 

  • Ex-showroom price – Rs 3,25,752
  • Current taxes – 26% ( which includes excise duty, VAT and infra cess)
  • Ex-factory price of the car will be – Rs 3,25,752 – 84,695 (26%) = Rs 2,41,057
  • Proposed GST for small petrol cars – 29% (Base – 28%, Cess – 1%)
  • Post-GST price – Rs 3,32,752
  • Price rise – Rs 7,000

Small Cars (Diesel)

How will GST affect the prices of India’s favourite compact sedan – the Maruti Dzire Vdi AGS? Maruti Suzuki had launched the new third-generation Dzire recently.

  • Current ex-showroom price – Rs 7,76,000
  • Current taxes – 27.50%
  • Ex-factory price – Rs 6,08,627
  • Proposed GST – 31%.
  • Post-GST prices – Rs 7,97,301
  • Price rise – Rs 21,301

Mid-Size Cars

For this segment let us take up the Honda City VX (Diesel) for reference, which is one of the segment leaders in terms of sales volumes.

  • Current ex-showroom price – Rs 13,71,512
  • Existing taxes – 41.50%
  • Ex-factory price – Rs 8,02,335
  • Proposed GST – 43%
  • Post-GST prices  – Rs 13,83,547
  • Price rise – Rs 12,035

Luxury Cars

This is one segment which has witnessed a lot of activity in India for living standards have bettered and given the fact that there are multiple options available, buyers are spoiled for choices. Let’s take the German manufacturer – Audi’s – entry-level sedan- the A3 35 TDI (Technology variant).

  • Current ex-showroom price – Rs 35,65,000
  • Existing taxes – 44.50%
  • Ex-factory price – Rs 19,78,575
  • Proposed GST – 43%
  • Post-GST prices  – Rs 35,35,215
  • Price drop – Rs 29,785

SUVs (Sports Utility Vehicles)

What else than the mighty Toyota Fortuner comes to mind! Here we are taking the updated Fortuner 2.8 AT 4X4 variant for reference in this rapidly growing SUV car segment in India.

  • Current ex-showroom price – Rs 31,86,000
  • Existing taxes – 48.50%
  • Ex-factory price – Rs 21,45,456
  • Proposed GST – 43%
  • Post-GST prices  – Rs 30,68,000
  • Price drop – Rs 1,10,000

It is safe to say that small and mid-sized cars will see a slight increase in prices, while the luxury and SUV segment will come with a slashed price tag. What an irony in a country like India, right?

(Note: – This may change in states which levy an octroi tax of 4%, like the case in Maharashtra and the Green Cess of 1% in Delhi).

Hope I was able to give you a preview of the possible fluctuations in car prices once the GST comes into effect. So go ahead and make your car buying plans accordingly! In case you are upgrading from a four-wheeler, try CARS24 to sell your old car, for we provide you with the Best Price for your used car, Instant Payment and Free RC Transfer.  Till then, always wear your helmets and seatbelts while on the road.