With Goods and Service Tax set to be implemented in India from 1st July 2017, automakers across the country are in a quandary on how this will impact prices and in turn sales. Under this new GST structure, the GST Council has revealed that cars will be subjected to a standard 28% tax along with some added cess.
This rate of cess will depend on classification of vehicles. Luxury vehicles will be taxed at 28% plus cess of 15% while the Council is still no clear on cess on small cars which will be in addition to the 28% tax. So in layman’s terms, what this translates into? Well, a car which is priced up to INR 5 lakh, will see an increase in price of upto INR 25,000.
Price of Maruti Alto, India’s highest selling car, will also be increased as the tax levied under GST will be 29% as against the 25% levied currently. This is one reason why mass market car makers are in a hurry to sell their cars before the GST is implemented, as they are expecting a slump in demand post 1st July.
Once GST is implemented, Renault is estimating that the cost of their best-seller – Kwid, which is now at INR 3.32 lakhs could go up by INR 7,900. Similarly, Maruti Suzuki DZire will also see a price increase of INR 21,000 post GST implementation.
To speed up sales, dealers across country are offering huge discounts. Even popular cars like Alto and Swift are being sold at a discount of INR 25,000 to INR 35,000. Hyundai is also offering discounts from INR 25,000 to INR 2,50,000 across range from the Elite i20 to the top of the line Santa Fe. Honda Cars India is also trying to lure customers into showrooms with exciting offers. The company has assured buyers of compensation if there is a decline in prices post introduction of GST.
However, GST is set to make luxury cars and SUV cheaper. A car in this category, priced upwards of INR 50 lakhs will experience a price cut to the extent of INR 50,000 to INR 2.50 lakhs. For example, Toyota Fortuner will see a price increase to the extent of INR 1,18,000 from a current price of INR 30,67,480 to INR 31,85,480 (ex-Delhi).