After GST Car Price in India

The GST or Goods and Services Tax will come into effect in India from 1st July 2017. This new tax will replace the varied taxes of before such as VAT, Excise duty, etc., into a new slab rate of taxes with added cess.

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Presented below is detailed information on how the GST will affect the different categories of cars available in the Indian market:

  • Under 4-meter cars with under 1.2-litre petrol engines: This is the most popular and largest car segment in India. It includes cars like Maruti Suzuki Alto, Hyundai i20, Maruti Suzuki Baleno, Hyundai Grand i10, Maruti Suzuki Dzire, Tata Tiago, and Volkswagen Polo, etc.
    • This segment is currently taxed at 31.5 percent, which includes VAT, excise duty, and additional cess. After GST is implemented, the new tax will be 28 percent of GST and 1 percent cess, which adds up to a total tax of 29 percent. This means that cars of this category will be 2.5% less expensive after GST. It will be cheapest category of cars after the rollout of GST.
  • Under 4-meter cars with under 1.5-litre diesel engines: It is also a really popular category that includes sub-compact SUVs, sedans, and premium hatchbacks. It includes cars like Maruti Suzuki Vitara Brezza, Hyundai i20 diesel, Maruti Suzuki Dzire diesel, Mahindra KUV 100, Mahindra TUV 300, Tata Tigor diesel, Ford EcoSport diesel, and Hyundai Xcent diesel, etc.
    • This segment is currently taxed at 33.25 percent, which includes VAT, excise duty, and additional cess. After GST is implemented, the new tax will be 28 percent of GST and 3 percent cess, which adds up to a total tax of 31 percent. This means that cars of this category will be 2.25% less expensive after GST.
  • Under 4-meter cars with over 1.2-litre petrol engines or over 1.5-litre diesel engines: Only a few types of cars fall under this segment and they include the Hyundai i20 1.4-litre automatic, and Ford EcoSport petrol with the 1.5-litre engine, etc.
    • This segment is currently taxed at 44.7 percent, which includes VAT, excise duty, and additional cess. After GST is implemented, the new tax will be 28 percent of GST and 15 percent cess, which adds up to a total tax of 43 percent. This means that cars of this category will be 1.7% less expensive after GST. This change in taxation is marginal; however as this category is relatively small, the impact will not be that great.
  • Above 4-meter cars (excluding SUVs) with over 1.2-litre petrol engines or over 1.5-litre diesel engines: This category of cars also has a large share in the Indian car market. It includes bigger hatchbacks and sedans such as Maruti Suzuki Ciaz, Honda City, and Mercedes-Benz E-Class, etc.
    • This segment is currently taxed at 51.6 percent, which includes VAT, excise duty, and additional cess. After GST is implemented, the new tax will be 28 percent of GST and 15 percent cess, which adds up to a total tax of 43 percent. This means that cars of this category will be 8.6% less expensive after GST. Such a big reduction in taxation will be a huge boon for this car segment and increase its popularity with the rapidly growing young and affluent Indians who are looking to move towards bigger high-end hatchbacks or larger sedans.
  • Above 4-meter SUVs with over 1.2-litre petrol engines or over 1.5-litre diesel engines: This category of cars includes SUVs that are bigger than 4 meters with any size engine displacement. The segment includes a larger variety, including the Audi Q7, Mercedes-Benz GLC, Ford Endeavour, Toyota Fortuner, Volkswagen Tiguan, Mahindra Scorpio, Tata Hexa, and Mahindra XUV 500, etc. The category of cars is quickly gaining in popularity and more and more sedan and hatchback car owners are looking to buy bigger SUVs, while luxury car owners are opting for luxury SUVs in place of cars like E-Class or the A-6.
    • This segment is currently taxed at 55 percent, which includes VAT, excise duty, and additional cess. After GST is implemented, the new tax will be 28 percent of GST and 15 percent cess, which adds up to a total tax of 43 percent. This means that cars of this category will be 12% less expensive after GST. This is the biggest tax rate drop in any category of conventional-internal-combustion-engine-powered cars/4-wheelers.
  • Electric Cars: Mahindra Electric is the only car maker in India that is currently selling electric cars, like the Mahindra eVerito and the Mahindra e2o, in India.
    • This segment is currently taxed at 20.5 percent, which includes VAT, excise duty, and additional cess. After GST is implemented, the new tax will be 12 percent of GST and no cess, which adds up to a total tax of 12 percent. This means that cars of this category will be 7.5% less expensive after GST. The tax cut for electric cars is indicative of the government’s push towards use of electric cars by Indians and influx of electric car technology into India.
  • Hybrid Cars: Hybrid cars are quite popular around the globe, but its share in the Indian car market is miniscule. This segment includes cars like the Toyota Prius, Toyota Camry Hybrid, Honda Accord Hybrid, Lexus RX450h SUV, Volvo XC90 T8, and Lexus ES300h sedan.
    • This category is currently taxed at 30.3 percent, which includes VAT, excise duty, and additional cess. After GST is implemented, the new tax will be 28 percent of GST and 15 percent cess, which adds up to a total tax of 43 percent. This means that cars of this category will be 12.7% more expensive after GST. The hike in taxes will prevent car makers from getting new and modern hybrid platforms and technology to India as doing so will not be economically viable in comparison to diesel or petrol engines.
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