GST for cars explained in detail
The enigma of GST is leisurely getting unravelled as it nears D-day. We give you a run through all the information we have to showcase how it will affect different car segments. All passenger cars have been slotted under the twenty eight per cent GST slab with variable extra taxes.
The doubts over the relevance of petite cars have been allayed. By definition, puny cars are under four metres in length and have petrol engines smaller than 1.2-litres or diesel engines displacing lesser than 1500cc. These cars include the compact hatchbacks like Maruti Alto and Renault Kwid, B-segment hatches like Ford Figo and Hyundai Grand i10 and the premium hatchbacks like Honda Jazz and Volkswagen Polo along with compact sedans like the Honda Amaze and the Maruti Dzire. This segment of cars will attract one percent extra tax for petrol cars and three percent for diesels.
Petite cars used to attract taxes about twenty six per cent to twenty eight per cent including excise and VAT which will now range inbetween twenty nine to thirty one per cent, pushing the price up by toughly three per cent.
Anything which is not covered under the puny car caveat, is charged fifteen per cent tax over the twenty eight per cent base slab. Cars with engines smaller than 1500cc were taxed at about forty one to forty two per cent which is set to increase to forty three per cent, a hike of one or two percentage points. Considering an average ex-showroom price of these cars at about Rs eight lakh (this segment includes C-segment sedan like Skoda Rapid and Volkswagen Vento) the price is expected to go up by about Rs 8,000 to Rs 15,000.
The D-segment sedans with higher capacity engines will also be charged forty three per cent under GST instead of the existing 44.Five per cent taxation. This segment includes cars like the Toyota Corolla, Skoda Octavia, Honda Accord and Skoda Superb. You can expect these cars to be cheaper by Rs 30,000 to Rs 50,000 depending upon the prices.
SUVs have had attracted the maximum taxes till date, but they will not be discriminated under the GST regime. The SUVs will also be taxed at forty three per cent as against the earlier forty eight per cent which means, the prices will come down by almost five percent. While the Bolero may get cheaper by about Rs 30,000, the Toyota Fortuner might become cheaper by Rs one lakh.
Luxury cars like Audi, Mercedes, BMW, Jaguar and Volvo are also going to be cheaper by about two per cent while luxury SUVs will turn out to be cheaper by almost five percent.
But there is a rider to all of this. GST will substitute the entire archaic system which means, the multi-level taxation for raw materials will also be done with for good. If GST manages to reign in repetitive taxation, the cost of production of cars might go down which will reduce the manufacturing cost of the car. In that case, the ex-showroom price of cars might actually turn out to be lower than the current prices. With the government drafting the anti-profiteering law to tackle businesses that do not pass the advantages of GST to the end consumer, there is a big chance of car buyers benefitting.
