The GST Impact on Cars: Has Buying Cars Become Cheaper?

With the announcement of GST, there has been great curiosity as well as confusion across the country with respect how it will impact the day to day lives. It will not be wrong to say that, it is one of the boldest moves made by the Indian government since demonetization that is expected to have wide repercussions for the economy.

I am sure every one us will have a fair idea of what GST is. For those who don’t, GST stands for Goods and Service Tax. It is a tax reform that is implemented across the country by the central government that will replace several taxes in general. With the GST rollout, India will come under a uniform taxation structure instead of having a different one across states. There is a lot of speculation about the prices of different items post-GST. When it comes to cars, it is no different. If you want to buy a car and wonder if GST will reduce the car prices or not, you are in the right place. Read on.

To begin with, GST has brought about a new classification structure for items. Under GST, cars are categorised as luxury goods. GST has replaced all centre and state taxes such as VAT, infra cess, excise, NCCD and so on. Under the slab of luxury goods, car fall in the 28 percent tax slab and above that, they will also attract an extra cess of either 1,3 or 15 percent depending upon the car make and model. While this may come across as bad news to you, don’t jump into conclusion right away. Let’s find out why.

As aforementioned, the tax rate will be levied depending on the car classification. The categorization is as follows.

  • SUV: Generally speaking, these are cars with a ground clearance of 170 mm and above and over four meters in length. Also, the engine should be either petrol or diesel based greater than 1.5 L.
  • Luxury Cars: These cars are over four metres in length and can be powered by a petrol or diesel engine greater than 1.5L
  • Mid-Size Cars: These cars have engines lower than 1.5L, petrol or diesel. The length is above four metres.
  • Small Cars: For small cars, the engines have to not greater than 1.2L for petrol, and not greater than 1.5L for diesel. The length has to be below four metres.

Coming straight to the good news, the car prices, in general, are expected to get reduced. The above-listed categorizations will dictate the pricing. Recently, Maruti Suzuki announced price cuts for its car range. The bad news is for people planning to buy hybrid cars. These cars are categorised as luxury cars and will attract 43 percent GST tax making them costlier.

In addition to car pricing, GST has also impacted car insurance rates. The service charge on insurance has gone up to 18 percent from 15 along with car loans. With this increase, it is important to get the best car insurance online with the best quote. You should check out Reliance Car Insurance to get a quote in a matter of seconds!

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