India is finally on the verge of having a simplified taxation system. But before the Goods & Service Tax (GST) comes into effect on July 1, 2017 (proposed), and replaces multiple state and central taxes with a single levy, let’s try to figure out how it will impact car prices in India.
Under the present tax structure, small cars (less than 4 metre in length and petrol engine under 1,200 cc and diesel engine under 1,500 cc) are taxed at 12.5 % and with another 12.5% to 14.5% of VAT and levies, the total rate goes up to between 25% to 27.5%. Car may costly upto 2%.
The new tax rate after the implementation of GST will push the total tax figure to more than 29%, resulting in an increase in prices of small cars.
Sedan and SUVS
Mid-segment cars such as the Honda City and the Hyundai Creta are likely to remain unaffected by the GST rates as these vehicles are already charged at around 43% of tax rate.
People looking to buy luxury cars or SUVs though have a reason to rejoice as GST might bring down the prices of such vehicles. Vehicles falling in this bracket are subjected to a heavy tax rate of around 55% in total. Post GST implementation, this rate will come down significantly to 43% (28% + 15%), resulting in a reduction of 12% in the tax rate. This means your next luxury car or SUV could soon become considerably cheaper.
Stay tuned to Auto Point Car Blog for more updates on how GST affect car price in India. Do you think the introduction of GST will be beneficial to car buyers? Do let us know via the comments section below.