GST On Cars At 28%, Additional Cess for Luxury Cars

Finance Minister Arun Jaitley announced last week that cars will be charged at 28 per cent GST. The earlier expectation was that this will be somewhere around 18 per cent, which stalwarts from the auto industry have been pushing the central government for. The range of Luxury cars, something which the government is yet to define, though will be charged at something more than 28 per cent GST. More details on this will be available on 4th November, 2016. A council of union and state governments of India are said to have approved these above mentioned slabs.

GST that stands for Goods and Services Tax basically unifies all the other existing taxes under a single umbrella. This means that local taxes cannot be levied on the goods, which is the current norm.

While the entire auto industry was quite optimistic about a lower figure with respect to the taxes, looks like cars and motorcycles both in the future are expected to be even more costly. If the GST was lower, let’s say, around 18 per cent, manufacturers basically can pass on that benefit to the customers thereby reducing the price of cars as well as making them more viable to manufacture and market.

Currently, the range of small cars or to be more precise, those below 4m in length and with petrol engine capacity under the slab of 1.2l and diesel, 1.5l, qualify for 28 per cent duty taxes. Those falling above this bracket or let us say mid-size sedans as well as SUVs are charged at 39 per cent.

CBU vehicles at the moment do not stand any chance of getting a tax benefits as the government is very keen on promoting ‘Make in India’. The cars made in the domestic.

market are more likely to attract lower taxes. Those falling under the ‘hybrid’ category might gain from the FAME incentives too, more so if they are made here.

Pawan Goenka, ED, M&M (Mahindra), said that there are multiple rates the market was expecting and the rate of 26-28 per cent on the higher side also is as per expectation. What is somewhat of a surprise was that everyone was thinking that the small cars would fall in the 18 per cent category and perhaps the large cars would fall in 28 per cent category. So it came as a surprise that the GST on small cars also will be 28 per cent.

Currently Mahindra share price is trading at Rs 1,384.00, up by 0.85 per cent.

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