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Old 4th August 2016, 09:43   #61
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Default Re: GST effect on car prices?

I don't understand much of economics and finance, but what I can analyze from yesterday's bill is that Good's tax will come down and government will compensate for that loss by the increased tax for service (I guess service segment has more growth than manufacturing segment). Plus they didn't touch the areas where government was already earning heavily by having a very high tax in segments like alcohol/ cigarettes/ petroleum/ automobiles, etc?

So overall government will not incur any losses, and its like a normalization or averaging out effect by playing between various segments.

Whatever said and done for supporting the manufacturing sector, I feel service segment shouldn't have been hiked so much.

Plus what will happen to those swach bharath cess, krishi kalyan cess and all? That will be taken off from our eyes and internally they will distribute it?

Last edited by Aditya : 4th August 2016 at 22:43. Reason: Please avoid political discussions
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Old 4th August 2016, 10:24   #62
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Default Re: GST effect on car prices?

The big change will be -
a. Dramatic reduction in tax evasion. It will be easier to build analytics to detect those evading taxes by because of inconsistencies in the chain.
b. India is now a free trade zone. States cannot impose trade barriers by differential taxation. So no more entry taxes on borders.
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Old 4th August 2016, 14:23   #63
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Default Re: GST effect on car prices?

Tax holidays only helped industrialists profit at state's expense. As soon as tax holidays were over, they got the same deal with another state and moved there.

Now it's a level playing field. States can still do other things to attract investment -like better infrastructure, 24 hour electricity at cheaper rates, land acquisition help, single window clearances etc. If any state has a new factory or industry coming up, it will still gain some tax revenue.

Overall, GST is great for Car industry, will make manufacturing in India even cheaper and hence bring more jobs to India. For majority of Indian consumers, the Car prices could become lower - so it's a good news overall.
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Old 4th August 2016, 14:37   #64
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Default Re: GST effect on car prices?

I have one dumb question which is hitting in my mind over many days. As per my understanding GST will reduce tax burden from buyers. But at the same time there will be revenue loss for the goverment as it is getting less tax. If we see illustration available online then this revenue loss will be quite big. So this loss will be compensated by

1. Reduced TAX evasion due to transparency
2. Increased market activity and hence economy will improve

But still my mind is failed to agree that all such positives, can they compensate Governments revenue loss? It should not merely compensate but it should increase revenue of Govt. Gove here I am including both state and central as a single entity.
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Old 4th August 2016, 22:03   #65
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Default Re: GST effect on car prices?

My take on GST
The tax of small cars currently is about 26-27% (Excise+VAT+NCCD etc) this is expected to be lowered to 18%, which is the rate being talked about.

Luxury vehicles (the definition is of luxury here is unclear - it could be above 4m or above 10lakhs or a new definition) currently are taxed at 45-50% range. The GST rate for luxury items is expected in the range of 40%.

Hence in both cases we could expect a 5-8% savings on the ex-showroom rate.

Also regarding the tax collection for the government, taxes on petroleum products and alcohol are outside the purview of GST. Customs is also not included. Out of the balance taxes, service tax goes up and tax on manufactured goods comes down. However a lot of small entities especially unorganized sector which were outside the tax net would be included and this would help maintain overall indirect taxes at current levels.
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Old 5th August 2016, 10:26   #66
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Default Re: GST effect on car prices?

a 10% drop in Ex-Showroom or OTR price on account of GST would be a substantial saving of say, like a Lac on the Creta . Is it worth the wait to buy a new vehicle only after GST is implemented in Apr'17?
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Old 5th August 2016, 10:31   #67
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Default Re: GST effect on car prices?

Quote:
Originally Posted by JoyPangli View Post
Tax holidays only helped industrialists profit at state's expense. As soon as tax holidays were over, they got the same deal with another state and moved there.
I wish it was that simple. certain investment has to be made, and that is in general not movable. If I invest say, 100 crores maybe I can move on and shift 50-60 of them. Also, the time lost? In general barring some unscrupulous guys, investments are made with the intention of staying.
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Old 5th August 2016, 11:02   #68
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Default Re: GST effect on car prices?

Quote:
Originally Posted by BUXX View Post
a 10% drop in Ex-Showroom or OTR price on account of GST would be a substantial saving of say, like a Lac on the Creta . Is it worth the wait to buy a new vehicle only after GST is implemented in Apr'17?
The drop in price could be greater than 10% because currently cars like Creta attract about 39% tax (Excise + NCCD + VAT). This can potentially come down by 21% and hence big drop in price.

This is provided government decides not to include cars >4m length and <1.5 litre engine as luxury car. If they do that, GST applicable will be 40% which means Creta will get pricier by 1%

Also timeline is debatable. Only by November this year we will really know if April'17 is a realistic timeline.

It is believed that small and mid size cars will be the biggest beneficiaries of GST. For bigger cars and SUVs there is a possibility that they will get more expensive.
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Old 5th August 2016, 12:03   #69
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Default Re: GST effect on car prices?

Quote:
The way we hope to be taxed after GST
Preliminary reports and data suggest an 18% tax rate for compact cars, which compared to the present 25% or so would mean a reduction of around 8%. On cars such as the Maruti Suzuki Ciaz and Renault Duster, the GST tax rate would be around 20%, which will mean a massive reduction from the present figure of around 40%.
Luxury cars could be taxed at about 40%, a relatively high number but compared to the present number in excess of 50%, luxury vehicle makers too have a reason to rejoice, no matter how small it may be. As a result of this taxation change and numerous other taxation efficiencies arising within the supply chain of these vehicle makers, the cost of vehicles is set to go down. With such a significant price-reduction, it's obvious that the benefits will be passed on to the end-customer, lowering vehicle costs anywhere between 8% and 25%. The catch to this is to know when it's the right 'next time.'
http://www.financialexpress.com/auto...6/?Socialmedia
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Old 21st August 2016, 11:19   #70
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Default Re: GST effect on car prices?

Just curious, how many people are waiting for GST to purchase a new car?

I work in the financial equity markets and there is work done by a number of sell side analysts on the same.

I have reproduced the consensus assuming 18% standard GST rate and 40% demerit rate:

For instance,
Small cars, 2W and CV's the savings is 10%
Large cars -A (>4m in length, <1500cc engines) like - Verna, City and Ciaz the savings is 20% assuming 18% and 5% assuming 40% GST rate
Large cars -B (>1500cc engines, <170mm ground clearance) like Scorpio the savings 7% assuming 40% GST
Large cars -C(All other including luxury) like Audi A6, the savings is 10% assuming 40% GST.

I for one, am waiting for the declared rates. Hopefully the rates should be out before end of CY16 and implementation, even if delayed by 2HFY18.

I am looking at replacing my Honda City and expect by pushing the decision to save atleast a lac.

Would recommend all if possible to push the buying decision by a few months, as it seems the prudent financial decision.
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Old 21st August 2016, 14:55   #71
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Default Re: GST effect on car prices?

@arakhanna; Good analysis. However, some states esp MH, DEL and KL want a higher GST. I frankly cannot understand Delhi which has traditionally enjoyed some of lowest ST in the country. I also think something like 16-18% should be adequate, but then states have a major say.
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Old 21st August 2016, 15:26   #72
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Default Re: GST effect on car prices?

There is a news of GST being implemented at 22%, not 18%.

So it basically means there will be dramatic rise in taxes after GST implementation.
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Old 21st August 2016, 18:56   #73
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Default Re: GST effect on car prices?

Quote:
Originally Posted by arakhanna View Post
Just curious, how many people are waiting for GST to purchase a new car?

I am looking at replacing my Honda City and expect by pushing the decision to save atleast a lac.

Would recommend all if possible to push the buying decision by a few months, as it seems the prudent financial decision.
I am also awaiting clarity on GST for next car upgrade from my present drive - Swift Dzire. If the GST does not prove beneficial, then I am open to looking for a lateral upgrade.

For now, it is wait and watch !!
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Old 22nd August 2016, 00:17   #74
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Default Re: GST effect on car prices?

The consensus is that by the year end we will know the rates. Also the rates will probably be effective from 1st April. If the rates do indicate a significant reduction in prices of some segments what will happen to car sales of that segment. Almost everyone will defer their purchase. Manufacturers however cannot close their assembly lines. Will we witness huge discounts.

I am also in the market for a new car. If the above scenario is possibly then it does make a lot of sense to wait till the end of the year.
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Old 22nd August 2016, 01:44   #75
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Default Re: GST effect on car prices?

Do people believe in fairy tales? I see some speculating that car prices may come down? People are so naive as to believe this? The zeal on part of the ruling Govts. in itself is a proof that there is something in it for Govt. Not for us. Govt. would not fight so tooth and nail over it if it weren't beneficial to it. And only one party can benefit. Either the Govt. or the people. Not both unless they print paper currency and shower from a plane on the streets. The zeal with which central and state Govts. since independence fleeced people by way of exorbitant taxes over automotive fuels should be enough indicator of this fact.
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