Simplifying the existent tax divisions, the Indian government recently implemented the Goods and Services Tax (GST). As with other industries, the Indian automobile industry too bore the brunt of this new setup. And while the manufacturers struggled to cope with this new tax regime, the public was left on their own. Given how complicated GST is, it is unreasonable to expect the public to make head or tail of it. And while the entire GST umbrella is too broad, here is the simplified effect of GST on vehicles:
Earlier, the tax levied on two-wheelers used to be 30.2%. Following GST, the tax rate for two-wheelers with an engine below 350cc is 28%. For scooters and bike with engine displacement above 350cc, the tax levied will be 31%. This negligible change would not lead to any significant price variations in the two-wheeler industry.
The commercial automotive industry comprises of three-wheelers and commercial vehicles. Before GST, the segment used to pay a total of 30.2% tax, which included Excise duty, NCCD, VAT, and CST. Three-wheelers were exempted from 1% NCCD.
Largely, the impact of GST on vehicles in this segment would be favourable. The tax rate has been decided at 28% and a marginal dip of 2.2% would be positive but again, negligible. Tractors too fall under the same category.
However, transport buses are the one exception here which are set to get costlier. Apart from the 28% tax levied on the passenger vehicle, an additional 15% cess will also be charged. And needless to say, 43% tax is indeed a cause for concern.
Petrol and diesel variants of small cars with engine below 1200 cc fall under 28% GST. Additionally, a cess of 1% to 3% is also charged. But the sum total is still lower than the former bracket of 31.4% to 33.5%.
Comparatively, bigger sedans and SUVs with an engine size of 1,500cc or more will enjoy greater GST benefits. The tax bar on the segment has been dropped from 46.6% – 55.3% to 43% (28% GST + 15 % cess).
Thus the total impact of GST on transport services in India can be summed up to be almost negligible. While all the categories have undergone a change in their tax rates, it is ever so slight. Fleet owners would suffer due to costlier buses while upper class would be relieved with cheaper luxury cars. For the middle class, GST has just brushed past the Indian automobile industry.