With GST going live on 1st July 2017, many people are wondering how it will impact their finances. And those people are more concerned who are planning to make their big-ticket purchases in near future.

Once such big purchase is that of a vehicle. So what has been the impact of GST on car prices? Let’s have a look at it.

To simplify things, the government has decided to put a GST of standard 28% on all vehicles irrespective of make, model, engine capacity, or body type (excluding electric and hybrid vehicles). But to maintain the differentiation, there is an additional cess levied over and above the standard 28%. This cess ranges from 1% to 15%, depending on the segmentation of the cars:

• Small cars that belong to Sub-4 meter size and having an engine capacity of 1.2-L or less will attract additional cess of 1%. So the effective tax rate here is 29%. For those cars having engine capacity between 1.2-1.5L will attract a cess of 3%, i.e. a total tax of 31%. When compared to earlier taxes, this is cheaper by 2-3%

• Cars with petrol engine above 1.2-L capacity and diesel engines above 1.5-L will attract additional cess of 15%. This is also applicable to SUVs and luxury cars. Here again, the impact of the switch to GST is a reduction in tax rates by 1-12%.

• Electric cars will have a GST of 12%, which is about 7.5% less than earlier taxes. But there are not many options available in this space. Unfortunately, the taxes have gone up on hybrid cars from 30.3% to 43%.

So as is evident from above, the cost of vehicles, in general, is expected to go down after GST. This fact combined with low interest rates on car loans these days make it a good time to purchase a car if someone is waiting on sidelines.