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GST: how it'll affect car and bike prices

The much-talked about and much-vaunted GST or Goods and Services Tax has finally been presented, with the government unveiling tax slabs for a whole range of, er, goods and services. It’s complex and surely unending, but we got some help from Sarika Goel, tax partner at Ernst & Young, who has simplified the bits for the auto sector. Here they are:

Small cars and bikes: Bad news. Prices aren't going down. In fact, they will go up marginally. With a GST rate of 28 per cent for cars under 4 metres with a 1 per cent cess slapped on, there will be a small hike. The GST bracket is similar to the existing tax structure, but before you heave a sigh of relief, there will be a cess of 3 per cent for small diesel cars with engines less than 1.5-litres and 1 per cent petrol cars with power units smaller than 1.2 litre. A 3 per cent cess will also be applicable to motorcycles having engines bigger than 350cc.

Big cars/SUVs: Good news, because there's going to be a drop in overall taxes for these kind of vehicles after GST is implemented. Currently, taxes are as high as 50 per cent, but SUVs will also now fall in the 28 per cent GST slab. Do not rejoice, though, because since that’s a significant drop, there is a -- you guessed it -- 15 per cent cess on top of that. Still, that’s 43 per cent overall taxes, which is less than what’s prevalent currently.

Electric vehicles: Looks like the government is serious about this, or is at least putting up a face to show that. So, electric cars are finally being slotted in a lower GST band. They will be taxed at only 12 per cent. Strangely, some of the parts on this still incur a higher 18-28 per cent rate. Refund of this excess GST is available, although this will “block significant working capital”.

Hybrids: No respite for manufacturers such as Toyota and Lexus who are banking on this tech. Hybrids will be taxed at the highest rate bracket of 28 per cent, which will continue to keep them expensive.

Commercial vehicles: These will be in the highest 28% bracket too. Passenger vehicles with a capacity to carry 10-13 persons will invite an additional 15 per cent cess.

Automotive parts: A 28 per cent GST has been proposed. That and a possible increase in tax rate for services will make after sales service and maintenance dearer.

The association of Indian auto manufacturers, SIAM, maintains that most proposed changes are positive. Its president, Vinod Dasari, however, added that some decisions such as taxation of hybrids and the additional cess on 10-13 seaters “merit a review”.

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