GST: A wolf in sheep’s clothing?

After announcing to implement the Goods and Services Tax (GST) way back in 2010, the Government of India is finally set to roll it out from July 1. Automobiles and auto components have been put under the 28 per cent+ tax slab, which changes a few things for the auto industry.

We have been paying around 27-28 per cent of taxes on small cars (12.8 per cent tax + 14-15 per cent state levied duty) till date. After the roll out of GST, small cars and sub-4 metre sedans will attract one per cent cess on petrol while the diesel powered cars will be charged three per cent. The consolidated tax rate then makes it 29-31 per cent, which will marginally increase the prices.

For cars up to 1500cc, the tax rate remains unchanged at 43 per cent. The main benefits will be offered to consumers buying 1500cc and above cars on which the duty now drops from about 50-53 per cent to 43 per cent. However, as SIAM along with NITI Aayog had been pushing for an all-electric market by 2032, the GST on electric cars is reduced considerably and will now be levied at just 12 per cent, equating to cheaper electric cars. Ironically, hybrid cars have not been put under the benefits and will continue to be charged under the regular category. This will also dampen the spirit of carmakers, discouraging them from focusing on hybrids.

Even spare parts will now attract a 28 per cent duty followed by a three per cent hike in service tax rate. Be ready to shell out even more to get your car serviced.

The official confirmation will only be made after the GST finally gets implemented, which is, after a month from now.