Impact of GST On Car Prices In India

By : Agencies | Updated at : 01 Jul 2017 05:30 PM (IST)

Cars now cheaper than before. Service charge on insurance and loans up from 15 per cent to 18 per cent

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Goods & Service Tax (GST) has now replaced all multiple state and centre taxes like excise, NCCD, infra cess, CST, VAT, etc. The implementation of GST has brought some good news for new car buyers. In most parts of the country cars have become more affordable than before. However in Delhi, all cars barring luxury cars and SUVs are now dearer.

It should also be noted that there will be some increase in insurance costs and loan EMIs as service tax has been increased from 15 per cent to 18 per cent.

Here's the pre-GST and post GST tax comparison for various vehicle classes in Delhi & Mumbai:

Delhi
		Pre-GST tax rate (incl. of ex-showroom)	Post GST Rates
			Base	Cess	Net
Small cars	Petrol	26% - 28%	28.00%	1.00%	29.00%
	Diesel	27.5% - 29.5%	28.00%	3.00%	31.00%
Mid-size cars		40.5% - 42.5%	28.00%	15.00%	43.00%
Luxury cars		44.5% - 45.5%	28.00%	15.00%	43.00%
SUVs		46.5% - 48.5%	28.00%	15.00%	43.00%
Hybrids		17.50%	28.00%	15.00%	43.00%
Electric		11%	12%	0.00%	12%
Mumbai
		Pre-GST tax rate (incl. of ex-showroom)	Post GST Rates
			Base	Cess	Net
Small cars	Petrol	31.50%	28.00%	1.00%	29.00%
	Diesel	33.25%	28.00%	3.00%	31.00%
Mid-size cars		44.50%	28.00%	15.00%	43.00%
Luxury cars		51.60%	28.00%	15.00%	43.00%
SUVs		55%	28.00%	15.00%	43.00%
Hybrids		30.30%	28.00%	15.00%	43.00%
Electric		20.50%	12%	0.00%	12%

Cars are considered as luxury goods under GST hence they fall in the 28 per cent tax slab. Over and above, based on vehicle classification there is an extra cess of 1, 3 or 15 per cent.

Compared to the existing taxes levied, only SUV and luxury car prices have come down in the capital. In Mumbai, however, other than hybrid cars, all other segments see a drop in tax percentage and therefore, reduction in ex-showroom prices.

Worth noting is the fact that hybrids are now classified as luxury cars only and attract 43 per cent GST. The increase in taxes will hurt hybrid vehicles the most in cities like Delhi where these vehicles previously enjoyed lower VAT rate (5 per cent) and excise duties (12.5 per cent).

Let’s consider a few cars to see the impact of GST on ex-showroom prices in Delhi and Mumbai.