The Goods and Service Tax (GST), the revolutionary taxation regime has now replaced the many state and central taxes. These would include infra cess, CST, VAT, NCCD or even excise. Hailing a complete change in how taxation is conducted in the country, GST will ensure that there is ‘one tax one nation’.
The car industry is one of the many industries that has welcomed the GST with open arms. If the whole impact of the bill were to be summed up in a sentence – the GST will make buying cars much cheaper in the long run. The detailed answer for this might be a little more elaborate than this.
It is important to keep in mind the fact that cars have been classified as a luxury item under the GST and thus, have been placed in the 28% tax bracket. Over and above this, depending upon the classification of the vehicle there is levied an extra cess of 1, 3 of 15.
So, here is how the GST will affect your bill if you are going to buy a car in any of the following categories:
Under 4 Meters
Cars under 4 meters are usually hatchbacks and small to mid-segment cars. The pre-GST tax rate for cars in this segment was something around 31.5%. With an additional 1% cess on this segment, the total tax rate for this segment of cars comes to 29%.
Diesel cars that come equipped with oil-burners of a capacity of 1.5 litres or less will be levied a 3% cess. This would make their total tax rate 31% as opposed to a pre-GST rate of 33.5%. Whatever car you may be looking to buy, be it a diesel or a petrol engine car, if you are buying it in this segment you are looking at saving at least 2.25% to 2.5% on your costs.
Under 4 meter cars with engines more than 1.2 litres for petrol and above 1.5 litres for diesel will attract a 15% cess over and above the GST. This would bring their taxation rates to 43% as opposed to the pre-GST 44.7%, a decrease of 1.7%.
Above 4 Meters
Sedans, semi-luxury and luxury vehicles that fall in this range have seen the maximum benefit in this new GST regime. The pre-GST tax rates for this range used to be 51.6%. After the 28% GST and the 15% cess levied on this segment of cars, the total post GST rate will be 43%. This would bring the total decrease of tax rate to a massive 8.6%.
These massive cars are a personification of power, and they have seen one of the biggest tax cuts in this GST regime. The whopping pre-GST rate for this segment was 55%, the changed GST rate brings it to a more manageable 43%. The decrease is the most among all the car segments.
Electric and Hybrid Vehicles
If there has been an increase in any segment of cars, it has been the hybrid segment. The post-GST rate of 43% is about 13% more than the previous 30.3%. There is however, good news for electric car buyers. The pre-GST tax structure for this segment was 20.5% which has been reduced to 12% thanks to the GST.