Impact of GST on Automobile and Spare Parts Industry in India

Buying a new car after GST?

What will be the impact of GST on Cars Prices and Automotive Industry in India?

In this article, you will find the things you need to know before buying a new car after the implementation of GST.

The Goods and Services Tax (GST), which is a unified form of prevailing various state and central taxes such as excise, NCCD, infra, cess, CST, VAT and much more. In the Indian economy, slight changes in the tax rates mean a lot, still, it is a huge transformation from a number of indirect taxes to the single one. Then, its impact will also be drastic, on each and every sector attracts indirect taxes.

If the automotive industry is being considered, the GST has turned out as a benefit for the potential buyers as not only the cars but also motorcycles and scooters, found the reduction in their ex-showroom prices post-GST. However, the service tax has been increased from 15 percent to 18 percent. Therefore, the insurance costs and loans EMI can also be costlier.

Impact of GST on Car Prices and Automotive Industry
Category	Effective indirect tax rates before GST	GST + Cess
Small car petrol	32.2	29.3
Small car diesel	33.9	31.8
Car over 4m, below 1500 cc	48.7	47.2
Car over 4m, above 1500 cc	52.1	47.2
Ground clearance 170 mm	55.5	47.2
2 Wheelers	31.1	28
2 Wheelers > 350 cc	31.1	31.8
CV	31.1	28

Under GST, as the cars are considered as luxury goods so they will fall in 28 percent tax rate slab. While the implied cess will depend on cars segments diversified via a defined criteria. There are three cess rates such as 1,3, and 15 percent which cumulatively defines net tax on vehicle ex-showroom prices.

Read Also: AAR: Now Vehicle Owners Pay 18% GST on Pollution Certificate

Car Segment Classification in India

The cars in India are classified by following criteria:

1. Small cars:  Measuring four-meters in length, propelled by petrol engine < 1.2 litre or a diesel engine ≤ 1.5 litre in displacement.
2. Mid-size cars: Measuring more than four-meters in length, propelled by either a petrol or a diesel engine ≤ 1.5 litre in displacement.
3. Luxury cars – Measuring over four-metre in length propelled by either a petrol or a diesel engine < 1.5-litre displacement
4. SUVs – Measuring over four-metre length, minimum 170mm ground clearance and  propelled by either a petrol or a diesel engine < 1.5-litre engine displacement

Note: Post GST, the hybrid cars are also considered as luxury cars as they attract the tax rates as same as luxury cars.

Recommended: GST on Petrol

GST Impact on Car Prices in India

Post GST, the list of applied tax rates on the different category of cars is given below:

Cars		Base Rate	Cess	Net
Small cars	Petrol	28%	1%	29%
	Diesel	28%	3%	31%
Mid-size cars		28%	15%	43%
Luxury cars		28%	15%	43%
SUVs		28%	15%	43%
Hybrids		28%	15%	43%
Electric		12%	0%	12%

GST Rate On Cars in India

Here is the pricing of some models from different genre after GST, see the changes in their ex-showroom prices.

Category	Engine	Model	Pre-GST, ex-Delhi	Post-GST, ex-Delhi	% Change
Small car	Petrol	Maruti Suzuki Alto 800 STD	Rs 2.50 lakh	Rs 2.49 lakh	-0.4%
	Diesel	Maruti Suzuki Dzire ZDi+ AGS	Rs 9.41 lakh	Rs 9.39 lakh	-0.21%
Mid-Size car	Petrol	Maruti Suzuki Ciaz Sigma	Rs 7.72 lakh	Rs 7.65 lakh	-0.91%
Luxury Car	Petrol	Toyota Corolla Altis 1.8 VL CVT	Rs 19.91 lakh	Rs 18.67 lakh	-6.23%
SUV		Toyota Fortuner 2.8 4WD AT	Rs 31.86 lakh	Rs 29.18 lakh	-8.41%
Hybrid Car		Toyota Camry 2.5 Hybrid	Rs 31.98 lakh	Rs 37.23 lakh	16.42%

Car Prices Before And After GST

Category	Engine	Model	Pre-GST, ex-Mumbai	Post-GST, ex-Mumbai
Small car	Petrol	Maruti Suzuki Alto 800 STD	Rs 2.74 lakh	Rs 2.61 lakh
	Diesel	Maruti Suzuki Dzire ZDi+ AGS	Rs 9.85 lakh	Rs 9.32 lakh
Mid-Size car	Petrol	Maruti Suzuki Ciaz Sigma	Rs 8.31 lakh	Rs 7.83 lakh
Luxury Car	Petrol	Toyota Corolla Altis 1.8 VL CVT	Rs 20.99 lakh	Rs 18.92 lakh
SUV		Toyota Fortuner 2.8 4WD AT	Rs 32.85 lakh	Rs 29.59 lakh
Hybrid Car		Toyota Camry 2.5 Hybrid	Rs 36.35 lakh	Rs 37.94 lakh

GST on Automobiles Spare Parts

Auto Component Industry has asked for the applicability of uniform Goods and Service Tax rate i.e. 18% for this sector and favored it by stating that the reduced taxation will increase the compliance and wide the tax base.

The reduced tax levy will also assist in decreasing affluence of the grey operations considering the secondary market. Nirmal Minda, ACMA President mentioned in a statement that around 60% components in the industry liable for 18% GST and 40% attract 28% GST and they need to align with a single GST rate.

Automotive Component Manufacturers Association of India (ACMA) also assisted for a fund creation mechanism to help home-grown technology and R&D considering the component industry. Further, it also assisted to move with a clear technology skeptic roadmap in electricity mobility in India.