A lot of speculation has been floating around GST or Goods and Services Tax ever since it was proposed and later on the effective date of implementation was announced as 1st July 2017. Particularly for vehicles where Excise Duty, NCCD (National Calamity Contingency Duty) VAT (Value Added Tax), Infrastructure Cess, CST (Central Sales Tax) were earlier levied, only GST and additional cess, depending on the category of vehicle is now the case. The plethora of taxes with their respective rates also incurred taxes on larger cars like SUVs or cars larger than four metres in the tune of 50 percent which have come down by seven percent. Not just these categories, but smaller cars have also witnessed minute reductions in taxes. Small petrol cars which were earlier taxed at 31.4 percent will now have to pay 29 percent tax and small diesel cars taxed at 33.4 percent will now have to pay 31 percent tax. Although the margin in smaller segments is less, it is still considerable as these cars have a significantly lower price tag. Even mass market two-wheeler manufacturers like Hero MotoCorp, Bajaj Auto as well as Honda Motorcycles and Scooters India have seen a minute reduction with the new tax structure.
GST Impact on Cars
Talking about small cars, Maruti Suzuki which has the highest stake in passenger vehicle sales of about 49 percent has seen a dip in its prices through its entire portfolio. The Ignis which used to retail the ex-showroom Delhi starting price from Rs 4.59 lakh is approximately Rs 9,000 cheaper. The Alto 800 too gets an approximate price reduction of Rs 5,000 while larger cars from the company's portfolio have seen an even larger price cut. The Vitara Brezza which started from Rs 7.26 lakh, ex-showroom, Delhi has now seen a drop of approximately Rs 60,000. The Ciaz has also seen a price dip of about Rs 30,000 which now starts from Rs 7.45 lakh, ex-showroom, Delhi. All the aforementioned prices are according to a dealership in Delhi.
Toyota Kirloskar Motors which has most of its sales, as well as products in the SUV and MPV categories, has also seen a considerable price drop. The Toyota Fortuner which used to start from Rs 26.66 lakh, ex-showroom Delhi, now costs almost Rs 2 lakh cheaper. The same is the case with the Toyota Innova Crysta which now retails for Rs 13.31 lakh, ex-showroom, Delhi, a massive Rs 89,000 price drop from the earlier starting price of Rs 14.20 lakh, ex-showroom, Delhi. The Etios Liva and Platinum Etios have also seen price cuts in the tune of Rs 25,000, depending on location and variant.
GST Impact on scooters and bikes
The benefit of GST is not just restricted to cars but has also seen a drop in prices in mass-market products as well. Unlike the earlier tax structure on two-wheelers where a standard 30.2 percent tax was levied on all, irrespective of engine capacity, scooters and motorcycles below 350 cc will now incur 28 percent tax while those above 350 cc will be taxed at 31 percent. Honda Activa 4G which used to start from a little over Rs 52,000 will now cost about Rs 50,000, a reasonable price drop when the segment it sells in is taken into account. Hero MotoCorp's Passion Pro i3S is now cheaper by about Rs 1,000 with a starting price of Rs 52,605, ex-showroom, Delhi. The price difference in two-wheelers could have been higher, however, the recent move from BSIII to BSIV emission norms which came into effect in April 2017 did increase the prices of two-wheelers considerably as the technology in BSIII to BSIV conversion or complete replacement involved changing critical mechanical parts to reduce emissions.
The overall impact of GST on the Indian automotive industry is positive. A number of segments where taxation of vehicles was perceived to be higher, has now seen a considerable drop. Even mass-market products have seen a dip in their prices. The only negative impact of GST is the increase of tax on hybrid cars from 30.3 percent to 43 percent which isn't really in sync with the Government's policy of going completely green by 2030. This has also kept manufacturers hesitant of bringing in such products and the portfolio of hybrid cars is limited. Electric cars which also have a limited portfolio in India right now has witnessed no change and a tax of approximately 13 percent is still there which may also not benefit in the long run. That said, this is the first step for GST which has made most segments cheaper and eventually may see reforms to promote hybrid as well as electric cars through various incentives.