GST Bill Good /Bad for cars

GST Bill Good / Bad for cars .

GST is about to roll on in few months. If you  planning to buy luxury car than you may wait for the GST Bill to implement. Benefit will be 4 to 12  %  points lowering in the tax.
That’s because indirect taxes such as excise duty, value added tax, state level taxes such as Octroi, local body tax and casess  get subsumed into the goods and services tax (GST), and cess on luxury cars get capped. Yet, a cheaper car is not a given, since manufacturers may raise prices and states could impose a new cess, tax experts at consulting firms said.

Luxury cars attract basic excise duty of 27%. Not only the locally assembled models of luxury car makers but premium models in mass carmakers’ line-up will also benefit from the new tax structure. For small cars, the GST is going to be tax neutral.

Currently a buyer of a luxury car or any other big car which includes a sport utility vehicle (SUV) pays a total duty of up to 55% of factory gate price which includes 27% or 30% excise duty, 12.5-15% VAT, 1% national calamity contingency duty, 1.8% auto cess, 1-4% infrastructure cess and another 4% Octroi/local tax in states such as Maharashtra.

Now with the maximum cess on luxury cars getting capped at 15%, and with a GST rate of 28%, the maximum duty one is likely to pay is 43%. All other local cess and taxes to get subsumed with the GST, said Waman Parkhi, partner, indirect taxes, at KPMG India Pvt. Ltd.

Difference in tax rates could be anywhere from two to 10 percentage points depending on whether its a sedan or an SUV, said Sarika Goel, partner, indirect tax at EY India.Car makers are still not celebrating as they are feared that the government could introduce a new cess for making up the revenue losses.

“I am not swearing by those numbers because the state governments can levy an additional duty,” said Shekar Viswanathan, vice-chairman at Toyota Kirloskar Motor Pvt. Ltd. On whether Toyota will pass on the benefit to the buyers, he said it would “pass on the benefit to the extent that it helps build volumes. One has to take into account the price to volume ratio.” Viswanathan said a lower tax on premium cars will help sales volume and will eventually benefit the exchequer.

Roland Folger, managing director and president at Mercedes India Pvt. Ltd, said, the firm is  “studying the proposed GST structure and it is premature to comment on the effect on the industry, till commodity-wise GST rates are not declared”.

Audi & BMW India are still declined to comment.