Team-BHP > Team-BHP Reviews > Indian Car Loans & Insurance


Reply
 
Thread Tools Search this Thread
Old 25th February 2020, 15:40   #16
BHPian
 
Join Date: Nov 2013
Location: Worldwide
Posts: 148
Thanked: 233 Times
Default Re: Rich folks are not so rich? 65% of Lamborghini buyers finance their purchase

Quote:
Originally Posted by D33-PAC View Post
What occupation in India makes 10 crores in small cities? Dividend income people?
Any doctor that owns a hospital is easily making that much, you have the emergency room, OPD, ICU,your own pharmacy, beds , trust me it's like a hotel on steroids.

Pharmacy profit margins can reach 1000%, compare that with a restaurant, each bed costs around a hotel room and each to costs more than a hotel room, an emergency visit will set you back more than 15k for a few hours there, ICU is another ballgame


Quote:
Originally Posted by AnInternetUser View Post
While I 100% agree with the points you've mentioned, I don't think the 49% is that simple. The surcharge has different slabs too + marginal relief. Additionally, the cess is calculated on the tax payable and not on the entire amount. This would mean that the total would be much lesser than 49%.

I'm not a CA or tax expert by any means, so don't quote me on this. But if my Tax classes in uni from two years ago serve me right, the figure would actually be much closer to 35% or so.

While the specific amounts in the calculation would be pretty different, the point still remains. But just thought I'd point this out
I pulled it online, I don't know how Indian tax system works but checked it online



Quote:
Originally Posted by dealer View Post
Any sources that you would recommend reading more about this on? I've always had an interest in understanding how the elites have been able to do this but haven't found any detailed explanation yet.
I don't have any sources but it's personal experience, when I was in India I used to have a sit down with my CA atleast once a month to go over my income taxes and GST, GST was another amazing tax reform. Even though it was botched up with too many slabs, politics and a common person not used to paying taxes but it really simplified the tax rebate system and no business was paying tax on tax thus being able to get better profits and at the same time provide the customer with better service


Quote:
Originally Posted by v1p3r View Post
When you mean cash poor, do you mean cash that is accounted for? Because it's getting very hard to use black money to buy a car. So yes, even an extremely wealthy person will not have 15 cr sitting around in white money, because it can be put to work at 12-15% quite easily. That will pay your Lambo EMI, assuming a rich person wants to buy a Lambo.

I would be surprised if any doctor who owns a small hospital makes LESS than 2.5 crores a year. I'm not sure where you're getting your income figures from, but I know enough salaried professionals who make more than that. And that's not even the real bulk money, which is with businesses in Tier 2 cities.

Also, 2.5 crores will nowhere be near enough to buy a decent Lamborghini. At a 2.5 cr income, you get about 1.6 cr in hand. A Lamborghini costs upwards of 4 cr. No one wise spends more than 20% of their income on a car. So you're looking at a maximum of 35 lakhs a year (assuming taxed income) being spent on EMIs. Suddenly, you're looking at something around the S Class level.

No one becomes, or remains (hello Anil!) rich by throwing money around on toys. You'll also notice that almost no self-made billionaires in India drive fancy cars themselves. If anything, it's their children who drive them. This is unlike the US and Europe, where people have a passion for cars. Put that down to us not having a car culture.


Can you run that maths once again? Little confused with the tax rate and the switch between crore and million.

With 2.5cr turnover you can easily get around 2.3 in hand if you are able to do your taxes properly. There are way too many expenses you can show and you also have the option to pay a flat 6% tax on your turnover. Multiple expenses you can show
1. Payments to employees
2. Salary to your self and then u can show deductions on that
3. Cars
4. Building depreciation ( which is huge)
5. Equipment ( which is on loan) depreciation
6. Collections
7. Fuel

And while loan underwriting depreciation actually is counted as a positive to the income so I see huge companies making losses but still getting loans because of the huge depreciations they claim

The actual EMI over the whole year for the car costing you would be close to 42L / year with the deductions like I explained below

Sorry been used to the million system for a long time now,
Buying a car at 4,00,00,000 you can claim an yearly depreciation at an average 15% that would be 60,00,000 , . That is tax savings at 35% of 21,00,000. Since many of these cars are financed at 7% for 7 years. Interest is another 21,00,000. It's higher in initial years due to amortization but let's take it at that for simplicity. Total tax savings of 30,50,000. Your EMI is around 6,00,000. Yearly tax savings - 30,50,000. Yearly EMI - 72,00,000. Car cost per year - 42,00,000. You are also able to deduct insurance, service, tyres etc.

The bigger benefit is to hoteliers and car trade sector. You are able to claim a full refund on your GST. That IMO is the another factor. A normal 50 key hotel with banquets has an yearly revenue easily crossing 15cr. Out of that GST is levied on all consumables and being able to claim each and every rupee of that is huge. Your car would cost you less than half of the price .


The phrase for this is 'hood rich'.
Easy access to credit is the major reason for it. Currently with my credit I can walk to any dealerships and just take out whatever car I want. Most of the lenders do stated income and you can state your income according to your credit. My interest rate would be 2-3% on any vehicle purchase. Could be 0% too. Even people with bad credit are given loan albeit at a higher interest ( upto 24%) as long as it makes a sale because the repossession is system in US is very streamlined

Last edited by V12Doc : 25th February 2020 at 15:42.
V12Doc is offline  
Old 25th February 2020, 16:10   #17
Senior - BHPian
 
v1p3r's Avatar
 
Join Date: Feb 2005
Location: BLR / BOM / LON
Posts: 5,154
Thanked: 4,152 Times
Default Re: Rich folks are not so rich? 65% of Lamborghini buyers finance their purchase

Quote:
Originally Posted by CarJunki View Post
GST paid on automobile is simply claimed as input tax credit for businesses.
This is not possible for most businesses.
v1p3r is offline   (3) Thanks
Old 25th February 2020, 16:22   #18
BHPian
 
Join Date: Oct 2007
Location: Bangalore
Posts: 207
Thanked: 262 Times
Default Re: Rich folks are not so rich? 65% of Lamborghini buyers finance their purchase

Quote:
Originally Posted by v1p3r View Post
This is not possible for most businesses.
May you elaborate why a business will be prevented to claim the GST as ITC?


If you are indicating about the composite scheme then I can understand. But then Most companies availing composite scheme will anyway not be able to buy a 4+cr automobile.
CarJunki is offline   (1) Thanks
Old 25th February 2020, 16:32   #19
Distinguished - BHPian
 
Santoshbhat's Avatar
 
Join Date: May 2011
Location: Bangalore
Posts: 2,326
Thanked: 6,460 Times
Default Re: Rich folks are not so rich? 65% of Lamborghini buyers finance their purchase

Quote:
Originally Posted by CarJunki View Post
May you elaborate why a business will be prevented to claim the GST as ITC?


If you are indicating about the composite scheme then I can understand. But then Most companies availing composite scheme will anyway not be able to buy a 4+cr automobile.
GST on any automobile is in the negative list. You can cannot claim it as ITC unless you are in the business of buying and selling cars or in the transport business.
Santoshbhat is online now   (5) Thanks
Old 7th April 2020, 21:08   #20
BHPian
 
gururajrv's Avatar
 
Join Date: Sep 2017
Location: KA 01-09
Posts: 836
Thanked: 1,437 Times
Default Re: Rich folks are not so rich? 65% of Lamborghini buyers finance their purchase

Very informative & a wonderful insight into the purchase, deductions, tax savings and making a profit not so explicitly

I’m a noob when it comes to tax / economy. So I will leave it at that and enjoy reading the comments as most of them have added tremendous value to this informative thread and I’ll learn something from it.

Last edited by gururajrv : 7th April 2020 at 21:09.
gururajrv is offline  
Old 8th April 2020, 05:58   #21
BHPian
 
harshavardhan's Avatar
 
Join Date: Aug 2005
Location: Bangalore
Posts: 107
Thanked: 24 Times
Default Re: Rich folks are not so rich? 65% of Lamborghini buyers finance their purchase

Hi,

Please refer to Section 16 of the GST Act, 2017.

ITC is allowed for goods & services used in course of business..

Thanks.



Quote:
Originally Posted by CarJunki View Post
May you elaborate why a business will be prevented to claim the GST as ITC?


If you are indicating about the composite scheme then I can understand. But then Most companies availing composite scheme will anyway not be able to buy a 4+cr automobile.
harshavardhan is offline  
Old 8th April 2020, 06:20   #22
Distinguished - BHPian
 
Join Date: Mar 2011
Location: Gurgaon
Posts: 4,485
Thanked: 14,887 Times
Default Re: Rich folks are not so rich? 65% of Lamborghini buyers finance their purchase

Quote:
Originally Posted by harshavardhan View Post
Please refer to Section 16 of the GST Act, 2017.

ITC is allowed for goods & services used in course of business..
Check the post above from Santoshbharat. If you are unsure it’s always a good idea to recheck before posting wrong information.

You cannot claim GST tax credit in ordinary businesses. Neither on repairs of automobiles or Insurance.
Turbanator is offline  
Old 8th April 2020, 10:07   #23
BHPian
 
harshavardhan's Avatar
 
Join Date: Aug 2005
Location: Bangalore
Posts: 107
Thanked: 24 Times
Default Re: Rich folks are not so rich? 65% of Lamborghini buyers finance their purchase

Sir,

Section 16 of the GST Act, 2017 mentions the requirement for claiming ITC. Hence the relevant Section of the GST Act is quoted by me.

Also, GTA (Goods Transport Agents) - in the Goods Transportation business, is not eligible to claim ITC. The recipient of Services has to discharge the GST on RCM (Reverse Charge Mechanism) in this case.

Hope the above clarifies. Thanks.

Quote:
Originally Posted by Turbanator View Post
Check the post above from Santoshbharat. If you are unsure it’s always a good idea to recheck before posting wrong information.

You cannot claim GST tax credit in ordinary businesses. Neither on repairs of automobiles or Insurance.

Last edited by Akshay1234 : 8th April 2020 at 10:12. Reason: spacing
harshavardhan is offline  
Old 8th April 2020, 10:24   #24
Distinguished - BHPian
 
Join Date: Mar 2011
Location: Gurgaon
Posts: 4,485
Thanked: 14,887 Times
Default Re: Rich folks are not so rich? 65% of Lamborghini buyers finance their purchase

Quote:
Originally Posted by harshavardhan View Post
Hope the above clarifies.
No, there is no provision to claim input on motor vehicles except few as mentioned before. These are under negative lists.

If this is what you mean, than it’s correct. I am not able to understand your answer in the context.

There were a lot of grey areas, as an example, using automobiles in business, say for marketing staff, travelling to customers, I still can’t claim GST on the cars they use and also any repairs of their cars. Because the government came up specifically with a Negative list.

Last edited by Turbanator : 8th April 2020 at 10:31.
Turbanator is offline  
Old 8th April 2020, 10:33   #25
Senior - BHPian
 
Join Date: Dec 2013
Location: Pune
Posts: 1,032
Thanked: 2,033 Times
Default Re: Rich folks are not so rich? 65% of Lamborghini buyers finance their purchase

Quote:
Originally Posted by CarJunki View Post
GST paid on automobile is simply claimed as input tax credit for businesses.
Not every one can do that. Even in transport section there are two options.
A truck taking casual booking, or a bus with owner selling tickets on per seat basis has to pay 5% Gst without any ITC. A truck on long term contract with a company, or a staff bus which is not used any where else can take full ITC on the cost of vehicle, and has to bill at 12% GST where again the customer (company leasing it) can take ITC.
The period can be between 36 months to 120 months.
If owner of vehicle leased for 36 months wants to use vehicle for casual booking after the lease is over, he has to pay GST again on 30% of vehicles original purchase value.


Rahul
Rahul Rao is offline   (1) Thanks
Old 8th April 2020, 14:04   #26
BHPian
 
harshavardhan's Avatar
 
Join Date: Aug 2005
Location: Bangalore
Posts: 107
Thanked: 24 Times
Default Re: Rich folks are not so rich? 65% of Lamborghini buyers finance their purchase

Yes, that's what I also wanted to convey. Sorry, if there is a confusion created due to the wording used by me.

There is no negative list in GST. The Negative list was in the erstwhile Service Tax.

The FAQs by CBIC / State Governments & AARs have clearly mentioned this.

Regards,


Quote:
Originally Posted by Turbanator View Post
No, there is no provision to claim input on motor vehicles except few as mentioned before. These are under negative lists.

If this is what you mean, than itís correct. I am not able to understand your answer in the context.

There were a lot of grey areas, as an example, using automobiles in business, say for marketing staff, travelling to customers, I still canít claim GST on the cars they use and also any repairs of their cars. Because the government came up specifically with a Negative list.
harshavardhan is offline  
Old 8th April 2020, 14:10   #27
Distinguished - BHPian
 
Join Date: Mar 2011
Location: Gurgaon
Posts: 4,485
Thanked: 14,887 Times
Default Re: Rich folks are not so rich? 65% of Lamborghini buyers finance their purchase

Quote:
Originally Posted by harshavardhan View Post

There is no negative list in GST. The Negative list was in the erstwhile Service Tax.

The FAQs by CBIC / State Governments & AARs have clearly mentioned this,
Maybe itís a laymanís term.

https://www.munimji.co.in/academic/b...under-gst.html
Turbanator is offline  
Reply

Most Viewed
Thread Tools Search this Thread
Search this Thread:

Advanced Search

Copyright ©2000 - 2021, Team-BHP.com
Proudly powered by E2E Networks