India is finally on the verge of having a simplified taxation system. But before the Goods & Service Tax (GST) comes into effect on 1 July, 2017 (proposed), and replaces multiple state and central taxes with a single levy, let's try to figure out how it will impact car prices in India.
As of 19 May, 2017, it's certain that cars will fall under the 'luxury' bracket and will attract a 28 per cent flat GST. Over and above, an extra cess of 1, 3 or 15 per cent is proposed depending on the classification of cars.
Since the implementation of GST is round the corner, the chances are high that the proposed extra cess will be a reality. If the current classification of cars is carried over (high probability), there will be four broad categories of cars:
1. Small cars – Cars under four-metre length powered by a petrol engine not greater than 1.2-litre or a diesel engine not greater than 1.5-litre by displacement
2. Mid-size cars – Cars over four-metre length powered by either a petrol or a diesel engine not greater than 1.5-litre displacement
3. Luxury cars – Cars over four-metre length powered by either a petrol or a diesel engine that is greater than 1.5-litre displacement
4. SUVs – Cars over four-metre length and 170mm ground clearance powered by either a petrol or a diesel engine that is greater than 1.5-litre displacement
1. Small car petrol category – Renault Kwid RXL 0.8
Ex-showroom, New Delhi price – Rs.3,32,312
Since Octroi is not levied in Delhi, the ex-showroom price of Kwid RXL 0.8 includes excise, VAT and infra cess, which roughly adds up to 26 per cent.
So, the ex-factory price of the Kwid = Rs.2,63,739
Now instead of 26 per cent that is charged presently, the Kwid will attract 29 per cent GST.
Ex-showroom price of the Kwid RXL 0.8 post proposed GST rates = Rs.3,40,223
Increase in price = Rs.7,911
2. Small car diesel category – Maruti Suzuki Dzire Vdi AGS
Ex-showroom New Delhi price – Rs.7,76,000
Since Octroi is not levied in Delhi, the ex-showroom price of Maruti Suzuki Dzire Vdi AMT includes excise, VAT and infra cess, which roughly adds up to 27.50 per cent.
So, the ex-factory price of the Dzire = Rs.6,08,627
Now instead of 27.5 per cent that is charged presently, the Dzire will attract 31 per cent GST.
Ex-showroom price of the Maruti Suzuki Dzire Vdi AGS post proposed GST rates = Rs.7,97,301
Increase in price = Rs.21,301
3. Mid-size cars category – Honda City VMT Petrol
Ex-showroom New Delhi price – Rs.10,12,797
Since Octroi is not levied in Delhi, the ex-showroom price of Honda City VMT Petrol includes excise, VAT and infra cess, which roughly adds up to 41.50 per cent.
So, the ex-factory price of the City = Rs.7,15,757
Now instead of 41.5 percent that is charged presently, the City will attract 43 per cent GST.
Ex-showroom price of the Honda City VMT Petrol post proposed GST rates = Rs.10,23,532
Increase in price = Rs.10,735
4. Luxury cars category – BMW 320d Luxury Line
Ex-showroom New Delhi price – Rs.42,70,000
Since Octroi is not levied in Delhi, the ex-showroom price of BMW 320d Luxury Line includes excise, VAT and infra cess, which roughly adds up to 44.50 per cent.
So, the ex-factory price of the 320d = Rs.29,55,017
Now instead of 44.5 per cent that is charged presently, the 320d will attract 43 per cent GST.
Ex-showroom price of the BMW 320d Luxury Line post proposed GST rates = Rs.42,25,674
Decrease in price = Rs.44,326
5. SUVs category – Toyota Fortuner 4×4 AT diesel
Ex-showroom New Delhi price – Rs.31,86,000
Since Octroi is not levied in Delhi, the ex-showroom price of Toyota Fortuner 4×4 Automatic diesel includes excise, VAT and infra cess, which roughly adds up to 48.50 per cent.
So, the ex-factory price of the Fortuner = Rs.21,45,454
Now instead of 48.5 per cent that is charged presently, the Fortuner will attract 43 per cent GST.
Ex-showroom price of the Toyota Fortuner 4×4 AT diesel post proposed GST rates = Rs.30,68,000
Decrease in price = Rs.1,18,000
The five examples above clarify that the most affected segment post GST in India could be the 'small car diesel' category. The mid-size sedan and small car petrol categories will also be negatively affected. On the flipside, luxury cars and high-end SUVs may end up being priced lower than what they currently are.
So, if you were planning a diesel hatchback or a sub-4m sedan, it's probably the right time to go ahead and make a purchase before GST rolls out. We've also heard that some dealers want to liquidate their existing stock quicker than usual to keep their balance sheets clean and not risk their input tax credit. If that's true and you're lucky, you may even get a good bargain.
For those who had set their eyes on a luxury car or a big SUV, just hang on for some more time to get more clarity on GST. Going by the anti-diesel sentiment, the government may find a reason to at least match the current prices of the SUVs and luxury cars. However, if that doesn't happen and prices drop, you may end up regretting an early purchase.
Also, worth noting is the fact that hybrids haven't been talked about as yet. While lower tax rates for electric cars are in place, hybrid cars like Maruti Ciaz SHVS, Toyota Prius and Camry hybrid that presently enjoy 12.5 per cent excise duty instead of 24 per cent or 27 per cent may end up getting more expensive. So, it's the best time to get home these fuel-efficient hybrid cars because they may not remain as lucrative a buy afterwards.
Source: CarDekho