GST Rate on Automobile Industry and GST impact on Automobile Industry

India’s automobile industry is a massive industry that produces a big number of automobiles and motorcycles each year, powered primarily by the country’s massive population. The GST (Goods and Service Tax) absorbed the majority of indirect taxes. The purpose of this article is to examine the GST’s applicability to the vehicle sector. In this article information on GST for Automobile, GST rate on automobile industry, GST impact on automobile industry, and other information on GST effect on car in India will be included.

What is GST (Goods and Service Tax)?

GST stands for goods and service tax. The goods and services tax (GST) is a value-added indirect tax levied on most goods and services sold for domestic consumption. The GST is paid via GST Return by consumers, but it is remitted to the government by the businesses selling the goods and services.

Impact of GST on Automobile Industry

Previously, excise and VAT were the two taxes levied on automobiles, with an average combined rate of 26.50 percent to 44 percent, which is higher than the GST rates of 18 percent and 28 percent. As a result, the GST imposes a lower tax burden on the final consumer.

Importers and dealers can rejoice because they will be allowed to claim the GST paid on products imported or sold, whereas they were previously unable to recover the excise duty and VAT paid.

Under the GST (Goods and Service Tax) Act, excise paid on stock transfers would be covered by IGST. Advances for the provision of products will be taxed under GST as well. Due to an improved supply chain system under GST, manufacturers will be able to procure auto parts at a lower cost.

The GST on motorcycles and cars is kept within the 28% threshold, and the Indian government has also announced a list of cess to be paid on various types of automobiles. Cess has been imposed on many types of autos, ranging from 1% to 15%.

Information for GST on Car

Cars are classified into five categories, and the GST rates are listed below

GST Rates on Automobiles

GST will benefit those who buy compact family cars like the Alto, Nano, Santro, and Datsun Go because a one-percentage-point surcharge has been added to the 18-percentage-point GST rate.

Two-wheelers and other bikes with engine capacities of 150cc to 180cc will be subject to 18 percent GST plus a 3% cess. Bikes with engines larger than 350cc, such as the Enfield 500cc or Harley Davidson, will be subject to a 28 percent GST rate plus a 17 percent cess.

Yachts, aircraft, and personal jets, for example, are subject to a 3 percent cess rather than a 15 percent cess, despite the fact that they are subject to a 28 percent GST.

Due to the competitive nature of the industry, automobile manufacturers provide a plethora of complimentary services/warranties. Previously, these untaxed commodities and services were not subject to taxation. The free services/warranties would be subject to taxation under GST.

GST (Goods and Service Tax) on Commercial Vehicles

The GST rate on commercial vehicles, such as those used to transport passengers, commodities, or for agricultural purposes, normally ranges from 12 percent to 28 percent. Below are some of the most common scenarios in which a GST rate of 12% is applicable:

• Tractors, with the exception of road tractors, for semi-trailers with engines larger than 1800cc.

• Agricultural trailers with self-loading/unloading capabilities.

Below are the examples where the 18 percent GST rate is applicable on cars and other vehicles:

• Vehicles that have been refrigerated.

• Self-propelled work trucks without handling/lifting equipment are often used at warehouses, airports, factories, docks, and other locations to deliver items over short distances.

• Breakdown lorries, crane lorries,concrete-mixer lorries, and other special-purpose vehicles.

• Various tractor parts, such as axles, gearbox assemblies, brake assemblies, bumpers, radiator assemblies, clutch assemblies, and so on.

• Buses for public transportation run entirely on biofuels.

GST (Goods and Service Tax) rate @28% for cars and other commercial vehicles applies in the below situations:

• Road tractors with engines greater than 1800cc for semi-trailers

• Accessories and parts for a variety of vehicles (excluding various tractor parts)

• Vehicles capable of transporting ten or more persons (excluding bio-fuel powered public transport buses)

• Vehicles used to convey commodities (excluding refrigerated motor vehicles)

Suggested read: Goods Transport Agency (GTA) Under GST Act

Exemptions from the Implications of GST on Automobiles

The GST tax system includes a mechanism for used automobile buyers to receive relief. Dealers of used cars may be required to pay tax on the difference in price between the selling and purchase price of the vehicles. The purpose of this relief is to eliminate the cascading effect, which is a source of concern for anyone dealing in second-hand autos.

Furthermore, if the above-mentioned differential value is negative, the dealers are exempt from paying the tax. In the case of the purchase of a used car from an unregistered dealer, the government also gives relief in the form of a GST exemption. The Act allows for the imposition of GST on automobile services or warranties provided by car dealers.