Small cars to cost more, luxury cars less

Buying a car in India will undergo changes, thanks to GST. Customers of small cars will have to shell out more cash, while luxury players have reasons to smile.

Meanwhile, the industry is in wait-and-watch mode, even as sentiments seem to be mixed.While small cars will be charged a 1% cess over the existing 28% tax under GST, mid-sized cars will attract a 3% cess. Tax on luxury cars, which is currently at 52-55%, would come down to 42-45%, with the maximum cess on these cars capped at 15%, with a tax-rate of 28%.

Explaining the impact of the new rates on the industry, Price Waterhouse Partner Abdul Majeed said, “Overall if you have to sum up, with the tax structure on smaller cars, not much will change, but bigger cars will derive some benefit. But there is one rider there. We need to understand the definition of luxury vehicles, which isn’t clear.”

A similar thought was echoed by Toyota Kirloskar Motor Vice Chairman and Wholetime Director Shrkar Viswanathan. While he did not go into how the GST Council had defined luxury vehicles,  he, however, felt that one should not stick to the earlier classification of engine capacity and length of the vehicle being criteria to define what is luxury and what is not.

Several carmakers hailed the move by the Centre. “We welcome the passage of the GST Bill. It would simplify existing norms and practices, making it easier to do business. The GST would help make our operations more efficient and free up resources enabling us to focus on designing, producing and selling great cars for our customers,” said Nissan India Managing Director Arun Malhotra.

No more green

Meanwhile, hybrid vehicles have been integrated with luxury cars, under the same tax bracket. In comparison, tax on electric vehicles is kept at 12%. Currently, hybrid vehicles attract excise duty of 12.5%.

Automakers have questioned this drastic move by the government. According to Hyundai Motor India Director (Sales and Marketing) Rakesh Srivastava, “The placement of green vehicles in the highest slabs of GST is contrary to the spirit of promoting green mobility in India, and will adversely impact the hybrid vehicle acceptance in future.”

Said Vinod Dasari, President of the Society of Indian Automobile Manufacturers (SIAM): “While a differential GST for electric vehicles will help electric mobility in India, we would have liked to see a similar differential duty on hybrid vehicles to continue.” 

Ola, Uber rides may get cheaper

Cab rides could get marginally cheaper for customers from July 1 as the incidence of tax will come down to 5% for bookings made on cab aggregators like Ola and Uber. Currently, a tax of 6% is levied on rides booked through cab aggregators. Amit Jain, president of Uber India and South Asia, said. “By ensuring that the new rate structure is not inflationary, the government has demonstrated its pro-consumer, pro-business sta-nce. GST will simplify the tax regime and we are excited to see how its impact unfolds across different sectors of the economy.”