GST could get more cars home

The long-awaited GST regime, which will be rolled out within a week, will affect the pricing structure of automobiles.

In terms of the auto sector, rates appear to be largely in conformity with the existing indirect tax structure. Policymakers have set the base GST rates across the spectrum at 28%, while levying a specified cess on vehicles belonging to different categories and sizes, resulting in variations in the end prices of each vehicle, depending on its segment and type.

It must be noted that the total tax rate on a vehicle, in the pre-GST regime, includes Excise, CST (Central Sales Tax), and VAT, and in some cases, Infrastructure Cess and Luxury Cess, which have all been reduced to only a single cess being levied under the upcoming regime, making cars and bikes some notches affordable.   
   
From July 1, among the various vehicle categories, two-/three-wheelers will see an effective GST rate of 28%, compared with the pre-GST rate of 30.2%, resulting in a change of 2.2%. There is no cess being levied. Likewise, sub-four metre small cars will see an effective GST rate of 29%, compared with the pre-GST rate of 30.2%, resulting in a change of 1.2%.

Mid-segment cars will also see some change in their pricing, as effective GST on them is set at 43%, compared with the pre-GST rate of 47.3%. Meanwhile, large cars of engines above
1,500 cc will see an effective GST rate of 43%, compared with the pre-GST rate of 49%. The SUV segment will see a whopping change in tax at 12.3%, after GST comes into effect with a rate of 43%, compared with the earlier rate of 55.3%.

While GST will streamline the tax structure, much to the understanding and convenience of common citizens, it is to be seen if the said new rates would adversely bring about reduction in overall selling price of each vehicle.

Analysing the current trend, Price Waterhouse Partner Abdul Majeed says, “Some moderation can be expected. There could be a dip to a certain extant (2-3%) on the prices of lower-end models and two-wheelers — being more tax-neutral, whereas for higher-end models, one can see more price reduction in the range of 8-9%.”