GST Rates: Planning To Buy A Car? Here’s How GST Will Affect Your Plans


The Goods and Services Tax is now a reality. Currently, the concern for all car buyers is how the new GST rates will affect your plan of buying a car or a bike? With the GST rates in play, the prices in some passenger vehicle segments will go down while hybrid/electric vehicles prices are set to go up. Also, we have a report for you with regards to how the GST rates will impact the pricing of two-wheelers in India. If you are wanting to buy a new car/SUV, how are the GST rates going to affect your buying decisions and where would you most likely end up spending more/saving. We try and figure this out for you.

The short answer to that is most of the cars that are currently on sale in the Indian market will become cheaper to some or the other extent post GST launch except for hybrid cars. But, the long answer is a bit more elaborated. The GST rates say that, there will be a standard 28 per cent tax on all vehicles irrespective of make, model, engine capacity, or body type, which comes with an internal combustion engine. Over and above this 28 per cent, there will be and addition cess levied up on them, either 1 per cent, 3 per cent or 15 per cent, depending on the segmentation of cars.
Essentially, cars that are under 4 metres in length and come with a petrol engine of 1.2-litre or less will attract and additional cess of 1 per cent after GST launch. This list includes cars likes the Maruti Suzuki Alto, Maruti Suzuki Dzire, Hyundai Grand i10, Hyundai i20, Volkswagen Polo, Tata Tiago, and Tata Tigor, among other. Whereas, sub-4 metre cars like Dzire diesel, Mahindra TUV 300, Maruti Suzuki Vitara Brezza and others, which come with oil burners with a capacity of 1.5-litre or less will attract a cess of 3 per cent in addition to the standard GST rate of 28 per cent. So, the overall reduction in taxes for these two segments is from 2.25 – 2.5 per cent.
Similarly, cars that come with petrol engine above the capacity of 1.2-litre and diesel engines over 1.5-litre will attract an additional cess of 15 per cent over and above the standard 28 per cent tax. This includes cars that are both under 4 metres and over 4 metres. So, cars like the Maruti Suzuki Ciaz and Ford Aspire and EcoSport (with the 1.5-litre petrol engine) will come under this category after GSt launch. These GST rates are applicable SUVs as well like – the Mahindra XUV500 and Toyota Fortuner along with luxury cars like the Mercedes E-Class, BMW 3 Series, and Jaguar XE among others. The tax reduction on cars that fall under these segments ranges from 1.7 to 12 per cent. Having said that, we have already explained all this, including a category-by-category breakup of which car slab becomes cheaper and by how much percentage, in our previous report so check that out here.
As for car buyers rooting for the environment, we have good news and a bad news both. Electric car lovers the good news is for you. The GST on electric cars will be 12 per cent, a good 7.5 per cent less than current taxation policies. Sadly though the only electric car currently selling in India is the Mahindra e2o plus so there aren’t too many options here. That said this might also be a positive sign for Tesla to finally enter the Indian market. On the other hand, If you were planning to buy a hybrid car like the – Toyota Camry, Toyota Prius, Volvo XC90 T8 plug-in hybrid, or even the Maruti Suzuki Ciaz or Ertiga with SHVS, then you’ll be paying an increased tax of 43 per cent post GST, which a good 13.3 per cent more than the current 30.3 per cent tax on EVs. This also begs to question will we now see more electric cars on roads or will hybrids become scarce as EVs in India.