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    The implementation of GST on July 1, 2017 unified India's tax system and had significant impacts on the automobile industry. Prior to GST, vehicles were taxed at rates from 28-55% depending on engine size and body type, with small cars taxed the lowest and SUVs the highest. Under GST, all vehicles are now taxed at 43%, with a lower rate of 29-31% for small cars and 31% for electric vehicles. This has led major automakers like Maruti Suzuki to announce price drops ranging from Rs. 2,300 to Rs. 23,400 on their vehicles, providing the most savings to larger cars, SUVs, and hybrid models.

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    The implementation of GST on July 1, 2017 unified India's tax system and had significant impacts on the automobile industry. Prior to GST, vehicles were taxed at rates from 28-55% depending on engine size and body type, with small cars taxed the lowest and SUVs the highest. Under GST, all vehicles are now taxed at 43%, with a lower rate of 29-31% for small cars and 31% for electric vehicles. This has led major automakers like Maruti Suzuki to announce price drops ranging from Rs. 2,300 to Rs. 23,400 on their vehicles, providing the most savings to larger cars, SUVs, and hybrid models.

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    159 views3 pages

    Impact of GST On Automobile Industry

    Uploaded by

    pvaibhav08
    The implementation of GST on July 1, 2017 unified India's tax system and had significant impacts on the automobile industry. Prior to GST, vehicles were taxed at rates from 28-55% depending on engine size and body type, with small cars taxed the lowest and SUVs the highest. Under GST, all vehicles are now taxed at 43%, with a lower rate of 29-31% for small cars and 31% for electric vehicles. This has led major automakers like Maruti Suzuki to announce price drops ranging from Rs. 2,300 to Rs. 23,400 on their vehicles, providing the most savings to larger cars, SUVs, and hybrid models.

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    © All Rights Reserved
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    of 3

    The fourteen years long journey of what is heralded as ‘Biggest-ever tax reform’ culminated into

    fruititon on July 1, 2017. Goods & Services Tax Law in India is a comprehensive, multi-
    stage, destination-based tax that is levied on every value addition. Goods and service tax is expected
    to eliminate the cascading effect of taxes it provides the much needed stimulant for economic growth
    in India by transforming the existing base of indirect taxation towards the free flow of goods and
    services.

    Acounting for 7.1% of countrys GDP the Automobile industry in India is among the largest in the world.
    Almost 13% of the revenue from central excise is from this sector and claims a size of 4.3% of total
    exports from India. Despite of its capacious contribution to the economy and a certain propitious
    growth potential the auto industry has been battling the complexities and hardships of multiple indirect
    taxes and higher tax rates for a considerably long time.

    Prior to GST the end used had to bear the burden following indirect taxES based on the segment of the
    automobile-

    Road Tax +
    NCCD +
    SEGMENT Excise VAT Motor Vehicle TOTAL
    AUTO CESS
    Tax
    Small Cars 28%
    12.50% 1.1% 14% State Based
    (displacement < 1200cc) (Approx)
    Mid-sized Cars 39%
    24% 1.1% 14% State Based
    ( 1200cc < disp. < 1500cc) (Approx)1
    Luxuary Cars 42%
    27% 1.1% 14% State Based
    (displacement > 1500cc) (Approx)
    SUV’s
    45%
    (displacement > 1500cc, 30% 1.1% 14% State Based
    (Approx)
    ground clearance > 170 mm)

    As can be seen above the excise duty for vehicles is divided into four slabs, in which the smallest tax

    rate is applicable to small cars. After GST is implemented, taxes levied by the centre like excise duty and
    state levels taxes like sales tax, road and registration tax would all be subsumed into one.

    Post GST automative sellers will be collecting and playing CGST and SGST (i.e. Central GST and State GST
    on intra-state sale of vehicles. Further, in case of inter-state sale of the vehicles, they will be collecting
    and paying IGST (i.e. Integrated GST, which is nothing but the summation of CGST + SGST).
    Impact of GST on procuremnt of vehicles is examined below:

    Body Legth / Taxation before GST GST Regime


    Enginge Capacity (Excise Duty + Various Cess + Difference
    Category NCCD + VAT) Taxation

    All sub 4-meter 29%


    Less than 1.2L Petrol 31.5% 2.5% 
    vehicles (28% + 1% Cess)
    All sub 4-meter 31%
    Less than 1.5L Diesel 33.25% 2.25% 
    vehicles (28% + 3% Cess)
    More than 43%
    All sub 4-meter
    1.2L Petrol 44.7% (28% + 15% 1.7% 
    vehicles
    1.5L Diesel Cess)
    Cars larger than More than 43%
    4-meter 1.2L Petrol 51.6% (28% + 15% 8.6% 
    (excluding SUVs) 1.5L Diesel Cess)
    Petrol & Diesel 43%
    All SUV’s larger
    irrespective of 55% (28% + 15% 12.0% 
    than 4-meters
    Displacement Cess)
    43%
    All Hybrid Cars 30.3% (28% + 15% 13.3% 
    Cess)
    20.5%
    Electric Cars (6% excise + 14.5% 12% 7.5% 
    VAT)

    As a result of GST Maruti Suzuki announced a price drop ranges from Rs 2,300 to Rs 23,400 depending
    on the the size of the car and the variant that is selected.

    Small cars with length under 4 meters with petrol engines under 1.2-litre and diesel engines under 1.5-
    litres have a price drop of 2.5 percent and 2.25 percent for example Indias best selling car Maruti Suzuki
    Alto’s price has been reduced marginally ranging from Rs 2,300 to Rs 5,400. However WagonR, which
    lies in the same caregory as Alto and is another car that enjoys massive popularity in India, saw a
    slightly more reduction in its price ranging from 5,300 to Rs 8,300 depending on variant and fuel type.
    Celerio saw almost same price cut as WagonR. The evergreen Swift however has received maximum
    price cut in this range Rs 6,700 to Rs 10,700.

    Larger cars above 4 meters have had a price drop of 8.6 per cent whereas SUVs have had a price drop
    of 12 per cent, the highest in any segment. The price cut for new Dzire ranges from Rs 8,100 to Rs
    15,100. The largest selling SUV i.e. Vitara Brezza gets the maximum price cut even though it is in sub 4-
    meters category. The SUV which is available only with a diesel engine gets price cuts ranging from Rs
    10,400 to Rs 14,700 depending on the variant.

    The larger S-Cross hatchback also receives a large price cut ranging from Rs 17,700 to Rs 21,300. The
    S-Cross gets two diesel engines and is longer than the 4-meter length which makes it eligible for a 12
    per cent price drop.

    The Ertiga MPV and the Ciaz both get petrol and diesel engines. The diesel engines get a mild hybrid or
    SHVS setup due to which Maruti classifies it as a hybrid car. While the price increases for the diesel
    models have not been announced yet, the petrol versions of the Ciaz and the Ertiga have received a
    price drop. The Ertiga gets cheaper by Rs 12,300 to Rs 21,800 while the Ciaz has received the largest
    price cut ranging from Rs 13,200 to a whopping Rs 23,400.

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