GST Effects: Do cars become costlier?

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GST has now arrived and is ready to be implemented on the stroke of midnight on June 30, 2017. People are worried whether there will be an increase in the car and bike prices due to implementation of GST. There are different costs which are involved in the purchase of car and bike for the end user. We will do a comparison of such costs prior and under GST.

Costs involved in purchasing a vehicle under current laws

Registration charges will be mostly neutral under GST. Major changes under GST would impact the cost of the vehicle and the motor insurance charges. VAT & service tax is charged currently on the cost of the vehicle. Different rates have been provided for different kind of vehicles.

All vehicles will be charged GST at the rate of 28 percent and specified cess for the vehicle. For bikes, which has an engine less than 350CC, no cess will be charged under GST as these are considered a necessity and not luxury. Small cars, which have an engine of less than 1200CC, are also deemed necessary and, therefore, will only be charged cess at the rate of 1 percent over and above GST at the rate of 28 percent. It is a surprise that the yachts, aircraft, personal jets and small cars with an engine over 1200CC would be charged cess at the rate of 3 percent. Medium segment cars less than 1500CC, SUVs and bikes having an engine of more than 350CC will be charged cess at the rate of 15 percent. High-end hybrid cars like Mclaren P1, Porsche 918 Spyder, Laferrari would be charged cess at the rate of 15 percent.
Must Watch: Another Tryst With Destiny! How GST Will Change Your Life After July 1

2Motor Insurance

Insurance services are also adversely affected by the introduction of GST as the rate has increased to 18 percent from the current tax rate of 15 percent. Motor insurance is a mandatory provision before the car or bike is sold to the end consumer. There will be an additional tax burden of 3 percent on the end consumer at the time of purchase of the car or bike.

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