Impact of GST on Car Prices in India

The table given below mentions the tax rates applicable to each car segment before and after the GST regime was implemented:

1. Small cars: Small cars such as Tata Tiago, Hyundai Grand i10, Maruti Suzuki Swift, and Volkswagen Polo attract tax equal to 18% in comparison to tax equal to 28% applied earlier.
2. Mid-size cars: The mid-size cars, like Maruti Baleno, Tata Nexon, Honda Amaze, and Nissan Kicks, see a drastic reduction of the tax rate from 39% to 18%.
3. Luxury cars: Luxury cars owners have to pay tax equal to 28% for cars such as Land Rover, Bugatti Chiron, Lamborghini, Aventador, Toyota Land Cruiser, and so on.
4. SUVs: The GST rate levied on SUVs such as Jeep Compass, Maruti Vitara Brezza, Renault Duster, Mahindra TUV, etc., is 28%, a 17% reduction from the total tax levied previously.
5. Electric vehicles: Individuals who bought electric vehicles had to bear tax equal to 20.5% earlier. After implementation of GST, the total tax levied has reduced to 5%.

Cess Rate Applicable on Cars in Addition to GST Rate

Apart from GST, a cess will be applicable over and above the GST rate for automobiles. The cess rate for each car segment, alongside the respective GST rate, is given in the table below:

Impact of GST on the Automobile Industry

The introduction of GST has been beneficial for the end consumer, dealer, as well as the manufacturer. The impact of GST on the automobile industry for each segment is as given below:

1. Consumer: As mentioned, the total tax rate levied on automobiles currently has reduced significantly as compared to the rates levied previously. This means that a customer has to pay a lower tax amount than he would have had to before the introduction of GST.
2. Dealers/importers: Importers and dealers in the automobile industry greatly benefit from the new tax regime as they can claim the tax paid. Earlier, VAT and excise duty could not be claimed.
3. Manufacturers: The introduction of GST that subsumes all previous taxes reduces the overall cost of manufacturing. Therefore, car makers also benefit from the new tax regime.

Besides the vehicle, services and warranties offered by car makers are also taxed. These were not taxed earlier but are taxed under the GST regime. The new tax system focuses on the consumption state more than the origin state, which makes growth viable for the automobile industry.

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