The concept behind the GST bill is to implement unification of the multiple taxes across the country. Currently, multiple taxes like VAT and excise duties etc are being levied on goods and services. For the automobile sector, it is considered to be a boon, as the implementation of the GST regime would result in manufacturers paying lower taxes and would subsequently be beneficial to the customers as well.

Once the GST gets implemented, it would eradicate many levied taxes (State, Central, and Local Body). The biggest or most significant factor of this regime is that it would be levied on the goods consumed, not where they are produced.

Currently, multiple indirect taxes are levied on the movement of goods like VAT, surcharges, and cesses. Therefore, automobiles such as trucks and bikes from the factory to the dealership to have passed through multiple checkpoints on route to pay taxes to the state governments.

The movement of goods will gradually become easier when one common tax is paid under GST this makes the entire movement of goods and services faster as well. With respect to taxation and duties, According to the current regime automobile sector cars are categorized into 4 segments such as –

DescriptionCurrent tax rate %After GST rate %
Small cars with petrol engine capacity below (1,200cc) and fewer than 4 meters in length (28% GST plus 1% cess) 25%29
Small cars with diesel engine capacity below (1,500cc) and fewer than 4 meters in length (28% GST plus 3% cess)24%31
Mid-size, Luxury cars and SUVs48-5543
Hybrid vehicles (28% GST plus 15% cess)3043

  1. Small cars with petrol engine capacity below (1,200cc) and fewer than 4 meters in length.
  2. As for the medium-size cars that come under the category of petrol and diesel engine, the petrol engine car (below 1,200cc) and diesel engine car below (1,500cc),
  3. Luxury cars with engine capacity of (1,500cc) and above.
  4. The SUVs with engine capacity above (1,500cc) and (170mm) of ground clearance and longer than four meters. A tax of 39% is currently levied on mid-size cars and a tax of 28% is levied on small-sized cars, which includes VAT and other duties.

It would definitely prove as beneficial as the taxes are likely to be reduced to some extent, hence cars will become cheaper after the implementation. Nevertheless, there is a thing, it would be favorable to those automobile sector companies, only which get produced in India.

The locally made vehicles are the ones, which would get cost advantages as the taxes get reduced for automobile companies relying on the CBU (completely built unit), there will not be any benefit. There have been various concerns with regard to the implementation of GST as there is no such provision has been made in the law that no other taxes would be introduced after the implementation of the regime.

The law has referred to bring the used vehicle to this regime to make it look more organized. According to the proposed regime, it may also be beneficial for the electric vehicle industry, and a mere 0-5% tax is levied on electric or hybrid cars in most of the states. It would also bring a boost to the particular industry and the manufacturers hope that the apex body does not amend the proposed regime.

Overall, after the analysis, it is presumed that it would bring positive changes in the automobile sector, as per the proposed GST regime.

In case you are confused about GST as a business owner, feel free to consult the GST experts at LegalRaasta. You can get comprehensive assistance on GST Registration and GST Return Filing. You can also use our GST software for doing end-to-end GST compliance.