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GST affects Automobile Industry

The Goods and Service Tax is set to be implemented on July 1 and it has everyone in a knot. Carmakers are making jaw-dropping offers and discounts to seek advantage of the confusion surrounding the new ‘One Nation One Tax’ system. They are trying to push sales and clear inventories before the month ends.

The cars that would take the most hit by the implementation of the GST will be the budget and mass-market cars. They would see an upward revision in their prices anywhere between 3% and 5%. Putting it simply, a car costing Rs. 5 lakh would see an increase in its price from anywhere between Rs. 15,000 and Rs. 25,000. Maruti Suzuki Alto would see an increase in its tax from the current 25%-27.5% to more than 29%. Maruti Suzuki dealers are expecting a slump in Bombay Stock Exchange to be about 1.07% and are already offering discounts ranging from Rs. 25,000 to Rs. 30,000 on Alto and Swift.

They are not the only ones. Hyundai is offering a discount of Rs. 25,000 on Elite i20, Rs. 2,50,000 on SantaFe, Rs. 45,000 on Eon, Rs. 62,000-Rs. 73,000 on Grand i10, Rs. 80,000-Rs. 90,000 on Verna and Rs. 25,000 on their new XCent till June 26, 2017. Datsun is offering free insurance and reduced interest rates on its range of vehicles. Honda has the most exciting offer yet, a compensation to all customers who buy before the implementation of GST in case the prices drop due to the new tax.

The implementation of the tax is set to affect the price of the budget cars. Renault Kwid which costs Rs. 3,32,312 (ex-showroom Delhi) would see a rise in its price by almost Rs. 7,900 due to an increase in taxes from the current 26% to 29% after the implementation of GST. Honda City i-vtec which costs Rs. 10,12,797 (ex-showroom Delhi) would see a rise in its price by almost Rs. 10,735. Current taxes including excise, VAT and infra cess are 41.50% and GST would be almost 43% on Honda City. Small diesel cars are expected to see an increase in their prices by more than Rs. 21,000. Maruti Suzuki Dzire which costs Rs. 7,76,000 (ex-showroom Delhi) would cost Rs. 7,97,300 post implementation of GST.

Luxury cars would have very appealing prices after July 1. The price of a car costing Rs. 50 lakh is expected to fall by anywhere between Rs. 50,000 to Rs. 2,50,000. Toyota Fortuner which costs Rs. 31,85,480 (ex-showroom Delhi) right now would see a drop in its price by almost Rs. 1,18,000 after GST costing Rs. 30,67,480 (ex-showroom Delhi).

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