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GST Of The Story

August 2017

Overdrive

The A-Z of how GST affects the Indian automotive sphere

The GST (Goods and Services Tax) structure has replaced the central excise duty and service taxes that were collected by the central government. The segment that benefited from the newly announced GST structure were the large vehicles with a displacement greater than 1,500cc as well as SUVs with a length more than 4 metres. This category attracted 15 per cent cess over the peak rate of 28 per cent, making it a total of 43 per cent. Previously, it was 27 per cent central excise along with a Value Added Tax (VAT) of 12.5 to 14.4 per cent was applied. In addition, there were state taxes, octroi and infrastructure cess that made it a total of 45 per cent.

The new GST structure also brought hybrid cars under the same slab as that of large vehicles, meaning a tax of 43 per cent will be levied on them. However, electric cars now attract a tax of 12 per cent. This was considered as an unfair decision in favour of hybrids, according to the industry. Hybrid cars employ cleaner and more efficient technology when compared to the conventional petrol- and diesel-powered vehicles. These vehicles are considered as the future and globally almost every manufacturer is looking to move to this space.