GST Implementation To Affect Car Prices


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Akash1886

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Friends,

Good News for those who plan to buy a new sub-4m car in future. The cars with sub-4m length and less than 1.5L engine to cost less by at least 12-13% upon implementing the GST.
"The automobile sector could benefit significantly from GST if the government accepts the recommendations of the GST panel and puts automobiles (except luxury cars) in the general category of standard goods and services with a rate of 17-18 per cent," said Sanjeev Prasad of Kotak Institutional Equities.

Small cars (length of less than 4 metres and engine size below 1500 cc) are currently taxed at 30.4 per cent, which includes an excise duty of 12.5 per cent, central sales tax of 2 per cent, national calamity contingent duty of 1 per cent and VAT of 12.5 per cent.

Once the GST comes into effect, manufacturers may have to pay a tax of 17 -18 per cent on small cars, which could bring down prices by 12 per cent to 13 per cent.
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Regards

Akash
 
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Re: GST Implementation To Make Small Cars Affordable

This is really a dream. Even if that dream has remote chance of becoming a reality, manufacturers will increase prices citing increase in input costs, problem with the dollar/yen etc. [:)] instead of passing those benefits to customers.
 
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Re: GST Implementation To Make Small Cars Affordable

As expected. This government does not disappoint. Milking whatever tax out of the "Rich" car buyers. No wonder we do not seem to get decently specced model with ample safety features whereas other markets gets the same through exports from India. Brilliant. Hail democracy.
 
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Will GST Be Claimable For Car Purchase?

Hi,

Wondering if any experts in taxation here. If we buy car on company's name and the company is GST registered, will the company be able to claim car purchase GST as input GST? Expecting answers only from experts.
 
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Re: Will GST be claimable for car purchase?

No you cannot take input as you are not a reseller(aka dealer). However, you can factor depreciation at 15% per year in your Book of Accounts.
 
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Re: GST Implementation To Affect Small Cars Prices

Well after the GST Council Meeting on 18.05.2017 Here are the rates below

1. Small Petrol car <1200cc<4m -28%+1 %Cess
2. Small Diesel Car < 1500cc<4m - 28% +3% Cess
3. Any car other than 2 above - 28% + 15% cess.

Based on the above there will not be much impact on cars under 4 meters but cars above 4 meters there can be a 3% to 8% savings for SUV's. That is because State VAT used to be calculated even on the Excise Duty and Infrastructure cess whereas GST will be calculated on the Transaction price. A big loser could be Ertiga and Ciaz SHVS since they will now be taxed like other over 4 meter cars and not at small car rates.
 
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Re: GST Implementation To Affect Small Cars Prices

What is the use of common tax when you again have cess?
Small cars in less vat states will get expensive. Big cars might see a price reduction especially in places where vat is more.
 
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Re: GST Implementation To Affect Small Cars Prices

If am reading it right, Is this the end of sub-4m cars era?

With tax difference of just 2% between cars of sub-4m and +4m length (and engine < 1200 / 1500cc), with this there is no need to develop sub 4m category vehicles and we are going to see a lot of turbo charged 1500CC Petrol / Diesel engines in the SUVs / luxury sedan segments, to effectively make it under mid-size ("non-luxury") category.

So
Tata & Maruti will be the biggest losers, below are the latest and upcoming launches of under 4m category

TATA TIGOR
TATA NEXON
MARUTI DZIRE
MARUTI BREZZA
 
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Re: GST Implementation To Affect Small Cars Prices

Well after the GST Council Meeting on 18.05.2017 Here are the rates below

1. Small Petrol car <1200cc<4m -28%+1 %Cess
2. Small Diesel Car < 1500cc<4m - 28% +3% Cess
3. Any car other than 2 above - 28% + 15% cess.

Based on the above there will not be much impact on cars under 4 meters but cars above 4 meters there can be a 3% to 8% savings for SUV's. That is because State VAT used to be calculated even on the Excise Duty and Infrastructure cess whereas GST will be calculated on the Transaction price. A big loser could be Ertiga and Ciaz SHVS since they will now be taxed like other over 4 meter cars and not at small car rates.
So literally brezza ciaz prices going up & creta and likes getting down !


Until now Ciaz was promoted as a hybrid car by Maruti Suzuki , but now after GST hybrids are having 28%+ 15% cess , so Maruti may soon do a full page to clarify govt that Ciaz is not a hybrid ! lol
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Re: GST Implementation To Affect Small Cars Prices

Here is the chart to give a clear picture:



The SUV segment, which has seen handsome growth of 29.91% in FY2017, is currently subjected to a heavy tax structure of around 55 percent – SUVs and large cars with engines bigger than 1500cc. Now, implementation of GST will effectively reduce this to 43 percent – 28 percent GST plus 15 percent cess. Clearly, this will act as a huge fillip to SUV as well as luxury car sales.

Mid-segment cars (sedans and SUVs with engines less then 1500cc), which are already taxed at around 43 percent, will not be impacted greatly due to the implementation of GST. With two-wheelers, three-wheelers and small cars set to see a marginal increase of 1-2% tax (28% GST + 1-3% Cess), the impact is expected to be negligible. Effect on consumer sentiments is expected to be negligible as dealers and OEMs usually tend to offer benefits to the consumer in the range of 1-2 percent. The Commercial vehicle segment, which currently is taxed at around 12.5 percent excise plus 12.5-14.5 percent State VAT, will see a flat GST tax of 28 percent. The difference of 1-2 percent ies estimated to have little or negligible impact on the segment.

Automotive components are proposed to be taxed at 28 percent GST. This could push up cost of aftersales service and maintenance of vehicles, coupled with a possible increase in tax rate for services as well from 15 to 18 percent.

Image source : autocarpro
 
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Re: GST Implementation To Affect Small Cars Prices

Are we doing the calculations correctly?

Usually, the cess is applied on tax value. (ie, if a product is of 128 Rs (base value 100 Rs + 28% tax). The cess that is applicable will be applied on Rs 28. So if the cess is 15%, then the cess value is Rs 4. So net payable by customer is Rs 132 (ie Rs 100 + Rs 28 (GST 28%) + Rs 4 (cess 15%)). That means effectively, the customer is paying 32% in Tax (GST+cess).

NOW, the question is how will the cess be applied on GST. Is it on the base value? or Is it on Tax value? Or is it on total value?

If Cess is applied on the base value, then the price will drop by around 7%.
If cess is applied on the tax value, then the price will drop by around 12%.
If cess is applied on total value, then the price will drop by around 3%.

NOTE: The price difference is on cars with bigger engines.
 
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Re: GST Implementation To Affect Small Cars Prices

No, cess is not calculated calculated on the taxed amount.It is over and above the base value + tax.

Remember when the union government introduced an infrastructure cess of 4% on larger cars in previous budget, a car whose price was around ₹10 lacs ex showroom, the increase in price was around ₹28000 to ₹ 32000.

Reference:

New Delhi, March 4, 2016: Honda Cars India Ltd., leading manufacturer of premium cars in India, has announced a price increase on its models effective March 1, 2016 after the levy of 'Infrastructure Cess' announced in Union Budget 2016 - 17.

City 24,600 ~ 38,100
Mobilio 21,800 ~ 37,700
CR-V 66,500 ~ 79,000
 

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