GST on Automobiles: Everything You Need To Know

The Goods and Services Tax (GST) is a uniform indirect tax applicable to goods and services that address the problem of cascading tax effect. Here is all you need to know about GST and its benefits.

Introduction

The Goods and Services Tax (GST), introduced in 2017 is a uniform indirect tax that replaced many indirect taxes. GST is the single indirect tax for the entire country. Earlier, different indirect taxes were collected by different Indian states. GST rates in India applies to all goods and services. The percentage of GST applicable differs for different varieties of goods. GST ensures that change-of-hands don’t affect the price of your dream car/bike.

Planning to buy a new car or a bike? Here are a few points about GST, and its impact on automobile prices.

Impact of GST on Automobile Prices

GST is made up of a number of components. These components are CGST, SGST and IGST. However, in the case of an automobile purchase, only CGST and SGST are the points to consider.

The Central Government levies central Goods and Services Tax (CGST) on an intra-state sale of automobiles. Before its introduction, automobile buyers paid taxes like Central Excise duty, Central Sales Tax and Additional excise duties etc.

The state government levies state Goods and Services Tax (SGST). Earlier, automobile prices comprised of a State Sales Tax and VAT.

GST has made your vehicle purchase simple, by subsuming the numerous taxes that were earlier levied, with just CGST and SGST. Thus, the price of your dream car has reduced due to GST.

GST Slabs: GST on cars are divided into various slabs. Based on the variety and size of vehicles, GST rates also vary. Different GST rates are applicable for small cars, mid-sized cars, luxury cars and SUVs. There are distinct GST rates for hybrid as well as electric cars. GST rates also differ for vehicles with different engine capacities. Click here to know more about GST on cars and other goods.

GST benefits: The benefits associated with GST on automobiles are listed below:

  1. GST has enabled hassle-free automobile purchase along with a fixed rate across the nation.
  2. Buyers planning to purchase small cars such as Alto, Santro, Nano etc. will particularly benefit from the lowering of tax obligations through GST.
  3. GST has reduced the cost of manufacturing cars. This is mainly due to the subsuming of the earlier applicable taxes on raw materials.
  4. GST has eliminated the problem of tax on taxes (also known as cascading effect) and has brought uniformity regarding the tax paid.
  5. GST is charged on the consumption state, rather than the origin state. For example, if the bike you are planning to purchase in Mumbai was made in Kerala, you would have to pay taxes in Mumbai. Earlier, you had to spend multiple taxes for the same. This has given a considerable boost to the automobile industry in India.
  6. GST has simplified automobile purchase through e-commerce by ending the confusion and hassles of various taxes to be paid.

Additional read: GST impact on healthcare industry in India

Conclusion

GST has solved the issue of cascading effects of taxes. Because of GST, the prices of automobiles are now uniform across Indian states. Thus, GST has eliminated the tax-on-tax system and decreased the prices of goods. Now, you can buy your chosen car without worrying about the tax difference that earlier existed across states.

Leave a Comment