How GST will affect car prices in India from Maruti Alto to Honda City and Mercedes S-Class

Under the new GST structure, cars will be subjected to a standard 28 % tax rate and some additional cess. The rate of the cess and the classification of vehicles under this structure is yet to be disclosed by the GST Council.

By: | Updated: May 19, 2017 4:06 PM

The country is moving rapidly towards the implementation of the Goods & Services tax (GST) and the GST Council has already fixed the rates for more than 1,200 items on 18 May, Thursday. While a lot of essential items such as consumer goods are set to become cheaper, small car owners might have to face disappointment. Under the new GST structure, cars will be subjected to a standard 28 % tax rate and some additional cess. The rate of the cess and the classification of vehicles under this structure is yet to be disclosed by the GST Council.

Speaking about the change in taxation, Sarika Goel, Tax Partner, EY India, said “While the GST Council debated GST rates for vehicles, no consensus was reached on the same during today’s meeting. While the taxation of luxury vehicles is widely being expected at 28% plus a cess of 15%, what is interesting to note, that as per the media reports, the Council seems to be considering levy of a cess even on small cars in addition to GST at 28%, albeit at a much lower rate compared to luxury vehicles. Definition of what would classify as small cars and luxury cars respectively is also awaited – it appears likely that the same would be based on engine capacity, length etc rather than the retail price. The FM, during the press conference post today’s meeting, mentioned industrial intermediates being taxed at 18% GST; however, it is not yet clear whether auto components would fall under this category.”

Under the present tax structure, small cars (less than 4 metre in length and petrol engine under 1,200 cc and diesel engine under 1,500 cc) are taxed at 12.5 % and with another 12.5% to 14.5% of VAT and levies, the total rate goes up to between 25% to 27.5%.

The new tax rate after the implementation of GST will push the total tax figure to more than 29%, resulting in an increase in prices of small cars. In the most price-sensitive segment in the country's automotive market, this increase could have a negative effect on the buying sentiment and thereby affect the manufacturers adversely.

Mid-segment cars such as the Honda City and the Hyundai Creta are likely to remain unaffected by the GST rates as these vehicles are already charged at around 43% of tax rate. The flat 28% tax and 15% of cess will bring the total to 43%, resulting in almost no change. However, if the cess on this segment of vehicles, we might witness a small reduction in prices.

People looking to buy luxury cars or SUVs though have a reason to rejoice as GST might bring down the prices of such vehicles. Vehicles falling in this bracket are subjected to a heavy tax rate of around 55% in total. Post GST implementation, this rate will come down significantly to 43% (28% + 15%), resulting in a reduction of 12% in the tax rate. This means your next luxury car or SUV could soon become considerably cheaper.

Concessions or rebates on hybrid and electric vehicles haven't been announced yet and announcement on the same is awaited from the Government.

  1. R
    Rupesh
    Jun 27, 2017 at 8:20 pm
    When to buy new dzire vdi before gst or after gst
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      Prasanta
      Jun 26, 2017 at 4:33 pm
      Please let me know what will be the change in price of Maruti Baleno Sigma car after GST. Currently it is around 6.5 L 9on road price)
      Reply
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        Lokesh Patnala
        Jun 26, 2017 at 12:12 pm
        i want to know the price of maruti ertiga vdi after gst i have booked it allready on 19 June 17
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          ashraf chaudhry
          Jun 26, 2017 at 12:09 pm
          what a shemozzle This government cant decide on uniform GST nor the inclusion of all goods and services in one go____ they have been at it for ages
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            pushpinder singh mankotia
            Jun 26, 2017 at 11:21 am
            i want to know the price of maruti ertiga zxi after gst i have booked it allready on may 13 2017
            Reply
            1. E
              Elay
              Jun 25, 2017 at 11:07 am
              HI, Am planning buy a Alto K10..Should i buy it Before or after GST? Kindly suggest
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                ANIL KUMAR KOMANDURI
                Jun 25, 2017 at 10:16 am
                I am planning to buy ford ecosport anium version. Pls let me know impact on price increase or reduction after gst implementation.
                Reply
                1. J
                  Joginder
                  Jun 24, 2017 at 2:49 pm
                  I am buying a maruti ecco what is the price after gst
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                    sivabd
                    Jun 24, 2017 at 10:55 pm
                    better to buy before Jul 1st as luxury vehicles tax increase expected. GST not only increase vehicle price but also insurance premium. Better to get better deal now and also ask for free insurance. Most of them give free insurance in the first year with extended warranties. Good Luck.
                    Reply
                  2. R
                    Rajesh
                    Jun 23, 2017 at 9:56 pm
                    Shall I buy maruthi eartiga now or after GST?
                    Reply
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                      sivabd
                      Jun 24, 2017 at 10:54 pm
                      better to buy before Jul 1st as luxury vehicles tax increase expected
                      Reply
                    2. R
                      Rajesh
                      Jun 23, 2017 at 9:54 pm
                      I AM PLANING TO PURCHASE MARUTHI EARTIGA, WHAT IS THE PRICE DIFFERENCE BEFORE GST AND AFTER GST?
                      Reply
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                        Vishnu
                        Jun 23, 2017 at 7:32 pm
                        I'm buying CIAZ ALPHA PETROL model should I wait till gst comes into effect or should I buy it now
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                          Naveenkumar Deivasigamani
                          Jun 23, 2017 at 5:45 pm
                          Hi Ankit, Planning to buy Toyota Innova Crysta . What will be effect after GST.. Will it be treated as luxury car
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                            Purandara Naik
                            Jun 23, 2017 at 11:23 am
                            nice ..good one very helpful...
                            Reply
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                              Mohan Kumar
                              Jun 23, 2017 at 10:18 am
                              Wonderfull cars
                              Reply
                              1. S
                                Sajid
                                Jun 23, 2017 at 9:02 am
                                Hi ankit, I'm looking to buy Honda city, does it makes sense to wait for gst? Thanks
                                Reply
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                                  sivabd
                                  Jun 24, 2017 at 10:53 pm
                                  better to buy before Jul 1st as luxury vehicles tax increase expected
                                  Reply
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                                  Shikha
                                  Jun 22, 2017 at 9:52 pm
                                  Honda brv will be in which category
                                  Reply
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                                    Diptesh
                                    Jun 22, 2017 at 5:09 pm
                                    Planning to buy ford endevour /Toyota fortuner What will be effect after GST.. Will it be treated as luxury car
                                    Reply
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                                      sivabd
                                      Jun 24, 2017 at 10:54 pm
                                      better to buy before Jul 1st as luxury vehicles tax increase expected
                                      Reply
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                                      ANKIT
                                      Jun 22, 2017 at 12:47 pm
                                      I THINK CRETA WILL ALSO BECOME CHEAPER ITS 1.6 LITRE ENGINE IS BIGGER THAN 1500 CC GROUND CLEARANCE IS MORE THEN 170 MM AND ITS BIGGER THAN 4000 MM LENGHT.
                                      Reply
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                                        Rajinder prasad
                                        Jun 21, 2017 at 3:51 pm
                                        What will be the rate of Maruti brezza after GST increase or dectease
                                        Reply
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                                          Pulkit kathuria
                                          Jun 21, 2017 at 1:43 am
                                          toyota fortuner will lie in which category? SUV or luxury SUV?
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                                            ANKIT
                                            Jun 22, 2017 at 12:48 pm
                                            its luxry SUV it will surely bene ed
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                                            Rakesh Doshi
                                            Jun 20, 2017 at 3:28 pm
                                            Sir i am planing to buy Maruti Baleno Diesel delta car. should a buy now or after GST ? what will be benefited ?
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                                              ANKIT
                                              Jun 22, 2017 at 12:49 pm
                                              you buy it before GST. because companies are clearing there stock and giving pre GST offers.
                                              Reply
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