How will GST impact your car buying decision?

Update: New car prices post GST

With the deadline of July 1 for its rollout looming large, here is some more clarity on the Goods and Services Tax (GST) and the impact it could have on the prices of cars. Under GST, there will now be four main vehicle categories: small cars, large cars, electric vehicles and hybrids. Most vehicle categories will fall under a standard 28 percent tax rate, along with a provision to separately levy an additional variable cess on any category.

Thus, largely, there has been a reduction in taxation across the board with the drop ranging from 2.25 to 12 percent, depending on the category.Hybrids, though, have been kept in the highest rate bracket there is, of 28 percent with an additional 15 percent cess (total of 43 percent), thus attracting the same amount of tax as a large car.But in a move that highlights the government’s push towards electric vehicles, GST has been kept in a tax band of 12 percent, which is 16 percent lower than any other vehicle category. 

However, it still remains to be seen whether car manufacturers will pass on the entire benefit of this overall drop in taxation rate to customers. For example, we believe that while the Toyota Fortuner would benefit from a 12 percent drop in total taxation, Toyota is expected to drop prices by only about 7 percent. For a more detailed understanding, refer to the Autocar India graphic.