NEW DELHI: India is on the brink of its biggest ever tax reform – the Goods and Services Tax (GST). The simplified taxation system which will be implemented from July 1 will certainly have some impact on finances. Here is how GSTis expected to affect car prices in India.
Under the current tax structure, a car buyer pays excise, VAT, infra cess and – in some states – even octroi or green cess. All these taxes together determine the ex-showroom price of a car.
From July 1, all cars will attract a basic GST of 28 per cent. The GST law also provides for levy of cess on top of the peak tax rate. This additional cess is either 1, 3 or 15 per cent depending on the classification of the cars. Much like the current scenario, cars will be taxed based on which of the four broad categories they belong to.
These are the cars which are not longer than 4 meters and have petrol engines not greater than 1.2 litre or diesel engines not greater than 1.5 litre.
Small cars currently attract a 12.5 per cent central excise duty and 1 per cent infra cess. Another 12.5-14.5 per cent VAT is levied by states, taking the total tax incidence to 26-28 per cent.
As per the GST rates revealed, small petrol cars will attract additional 1 per cent cess and diesel variants will attract 3 per cent on top of the standard 28 per cent.
So, if one is looking at buying the Renault Kwid STD 0.8 petrol, its current ex-showroom Delhi price is close to Rs 2.65 lakh, but after the GST the price will stand revised at Rs 2.71 lakh.
In cases of diesel variants in the small car segments, the 3 per cent cess will take the tax incidence to 31 per cent. Thus, the price of a Maruti Suzuki Dzire diesel automatic which starts at Rs 7,76,000 would jack up by almost Rs 21,000.
Mid segment cars
Not all cars will get expensive after the GST. Luxury cars like the Audis and BMWs will cost less from July 1.