[sayakc]

As I went through it, my eyes popped out literally on the amount of taxes that contributed to the ex-showroom price. e.g. if I consider a SUV e.g. a Tata Safari, the GST is 43%.
So if the ex-showroom price of a car = Rs 20Lacs
Then the GST = 8.6 lacs.
Based upon the above, have the following questions:

1. Is the above understanding correct?
I think, I must surely be missing something.

2. If true, it also means that the manufacturing cost (including profits) of a 20 lac ex-showrooom car = Rs 11.4 lacs. Whereas a common man is forced to pay a significantly higher amount to purchase, solely due to tax. Coming to the tax, is the amount of taxes charged "normal"/"higher"/"lower" when compared to other countries?

Considering that after a house, the car is the second most valued asset in the family, the GST disparity(5% vs >= 29%) seems out of proportions.

Would welcome comments from the experts!

Thanks,
Sayak

[GTO]

Thread moved from the Assembly Line to the Indian Car Scene!

[Leoshashi]

Yes it's true, I was a bit amused too when I saw breakup of value of my XL6. For a car whose Ex-Showroom value is 10.41 lacs, more than 3 lacs go towards the tax. If one considers On Road price which was 11.9 lacs including insurance, warranty, road tax, registration etc, total tax amount easily crosses 4 lac mark!



PS: Your calculations seems a bit off, if 43% tax is taken and amount reaches 20 lacs then approximate ex-factory cost should be around Rs. 14 lacs.

[Turbanator]

I think OP has taken references from old data, currently GST on automobiles is even higher as the Government corrected that anomaly where post GST prices were lower than VAT regime

Have a look at the current cess, so on luxury cars and SUVs it should be net 48-50%.
(28% basic plus 20 or 22% cess)



https://www.myloancare.in/gst/gst-on-cars/

[ninjatalli]

Interesting. Considering all our financial decisions wrt the budget for a car starts with the ex-showroom price, I'd also look at it from another point of view.


If I consider the same car from the same manufacturer (e.g. Tata Nexon)

1. ICE option: For every rupee I pay to the manufacturer, I pay an additional 0.3 - 0.4 rupee to the govt as GST tax

2. EV option: For every rupee I pay to the manufacturer, I pay an additional 0.1 rupee to the govt as GST tax

Yet for those evaluating an EV vs ICE option within a specific budget, people don't realize they are paying more to the manufacturer for the "same" car but lesser to the govt. So ideally the manufacturer price should be lesser for an EV option vis-a-vis the ICE option. Effectively if I pick a Nexon EV over a Nexon top-of-the-line variant, Tata is actually getting more money from me than they would if I had taken the ICE option.

[ecenandu]

Originally Posted by Leoshashi

PS: Your calculations seems a bit off, if 43% tax is taken and amount reaches 20 lacs then approximate ex-factory cost should be around Rs. 14 lacs.

Originally Posted by sayakc

Pls refer to the AFTER GST column of the following

As I went through it, my eyes popped out literally on the amount of taxes that contributed to the ex-showroom price. e.g. if I consider a SUV e.g. a Tata Safari, the GST is 43%.
So if the ex-showroom price of a car = Rs 20Lacs
Then the GST = 8.6 lacs.
Based upon the above, have the following questions:

Leoshashi is correct.

Factory price + Factory price*43/100 = Ex showroom price.

So in your example, for an ex showroom price of 20 lakhs, factory price will be 13.98 lakhs and 6.02 lakhs of tax.

[AirWind]

Originally Posted by sayakc

As I went through it, my eyes popped out literally on the amount of taxes that contributed to the ex-showroom price. e.g. if I consider a SUV e.g. a Tata Safari, the GST is 43%.
So if the ex-showroom price of a car = Rs 20Lacs
Then the GST = 8.6 lacs.
Based upon the above, have the following questions:

My TATA Safari Adventure Persona XZA+ variant was charged at 14.5L by TATA incl. dealer commission, on top of it is a 48% adder (28% GST and 20% GST Cess) to get ex-showroom price of the car = 21.5L, then you add 20% road tax in KA on top of this some 4.xL, Rs. 1L in insurance, some 20k in TCS, the total OTR becomes 27L

[ashlil]

Now I have several questions on this.

1) The car cost is obviously sum of all its component costs. So, think of a touchscreen infotainment system whose manufacturing price is x. If this is fitted on a sub 4 m (sub 1200 cc) car, you pay x+x*0.29 for it. If the same unit is fitted onto a >4m car, you pay x+x*0.5 for it. So, the fully loaded cars are actually generating the most money for the government and helping perpetuate this nonsensical tax structures?

2) Do the car companies pay GST when they buy the car components from suppliers? If so, do they get to deduct input GST? If so, do the customers get to see any benefit of the input GST deduction. For example, a car stereo comes under 28% GST. But if it is fitted to a >4m car, we pay 50% GST + Cess. The car company can claim deduction of 28% from the 50%. But, do we, as customer, get that benefit?

3) Wouldn't it be more cost effective for customers, if car companies sell cars with all features that cannot be post fitted but without any feature that can be post fitted? Why are they not doing it? It seems as if we are being squeezed by both the companies and the government.

[vishnurp99]

To be fair to the government, and the tax system that has been built over the last 70 years, Anybody who can afford even an Alto is not a common man in India. We are talking about a country whose per capita income is around 1800 dollars annually.

[ramki.grandhi]

Recently my friend purchased Harrier for 23.5 lacs in Bangalore. We realized below split

One has to earn : 34 lacs
Income tax : 10.5 lacs
Harrier price OTR : 23.5 lacs
Road tax and GST : 3 + 9 lacs
Insurance : ~70k
Finally TML gets : ~11 lacs

You get: A car worth ~10 lacs for real. (Assuming TML and dealer profit is 10%) + insurance value.

Edit: Government gets 22.5 lacs

[anthusiast]

Originally Posted by ashlil

Now I have several questions on this.

1) The car cost is obviously sum of all its component costs. So, think of a touchscreen infotainment system whose manufacturing price is x. If this is fitted on a sub 4 m (sub 1200 cc) car, you pay x+x*0.29 for it. If the same unit is fitted onto a >4m car, you pay x+x*0.5 for it. So, the fully loaded cars are actually generating the most money for the government and helping perpetuate this nonsensical tax structures?

Very good point indeed!. This is why base variants in some models make most sense when all the In-car Entertainment accessories can be retrofitted later.

Consider Creta which falls in 43% GST, combined with higher tax (in states like KA) for >10 L ex.sh. prices, the top end variants end up being close to 2x the OTR price for base variants. Check out the modifications possible to the Creta E variant (available at 9.95 L Ex. sh) in Youtube and it makes sense not to pay a premium to the bling which can be.

Originally Posted by ashlil

2) Do the car companies pay GST when they buy the car components from suppliers? If so, do they get to deduct input GST? If so, do the customers get to see any benefit of the input GST deduction. For example, a car stereo comes under 28% GST. But if it is fitted to a >4m car, we pay 50% GST + Cess. The car company can claim deduction of 28% from the 50%. But, do we, as customer, get that benefit?

Can't expect any such concessions (even though logical) from the Governments. Cars are still seen as luxury items and are big revenue generators for Govts. The Govts. fines passengers in personal cars for not wearing masks but allows crowded RTC buses and trains.

Originally Posted by ashlil

3) Wouldn't it be more cost effective for customers, if car companies sell cars with all features that cannot be post fitted but without any feature that can be post fitted? Why are they not doing it? It seems as if we are being squeezed by both the companies and the government.

A resounding Yes from me Frustrati= Both the Govts and Manufacturers are happy to squeeze to the last rupee.

Thats why I respect those manufacturers who offer 1)Good Engine 2) Best safety (5/4* NCAP), ESP etc in the base variants.

The best example I see is Tata Nexon XE - comes with safety features matching the XZ+ variant. It gets ESP, TC, BA. Hence I find it better to go with XE/XM and retrofit many of these accessories later.

[Karvel]

Originally Posted by ashlil

Now I have several questions on this.

2) Do the car companies pay GST when they buy the car components from suppliers? If so, do they get to deduct input GST? If so, do the customers get to see any benefit of the input GST deduction. But, do we, as customer, get that benefit?

3) Wouldn't it be more cost effective for customers, if car companies sell cars with all features that cannot be post fitted but without any feature that can be post fitted? Why are they not doing it? It seems as if we are being squeezed by both the companies and the government.

Yes, car companies get the input benefit. And yes, govt gets more tax if you buy the same equipment, but in a bigger car or diesel car.

As an individual customer, one does not get any benefit of the tax paid. On the other hand, if you are a practitioner with a GST registration or a company with gst registration, this can be claimed as input tax credits depending on how you are declaring and filing your returns.

Models and features by companies depend on the hassle customers have to go through in getting all the best fitments done. And the benefit will be the 20-25% savings on GST on those specific components. The fear by OEMs will be that you will get it from third parties, say a Pioneer instead of Bosch, there by losing margin, and the job quality which might not be consistent and warranty impacts. Its always a catch22 situation.

[sayakc]

Thanks Leoshashi and ecenandu for correcting me.

The point that I was trying to understand was the amount of money that goes to the govt for each car purchase is mind boggling indeed. The affordability of cars in our country will remain a pipe dream for most people if the tax structure continues to remain this way.

Originally Posted by Leoshashi

Yes it's true, I was a bit amused too when I saw breakup of value of my XL6. ...PS: Your calculations seems a bit off, if 43% tax is taken and amount reaches 20 lacs then approximate ex-factory cost should be around Rs. 14 lacs.

Originally Posted by ecenandu

Leoshashi is correct.

Factory price + Factory price*43/100 = Ex showroom price.

Thanks Turbanator for the corrected table!

Originally Posted by Turbanator

Have a look at the current cess, so on luxury cars and SUVs it should be net 48-50%.
(28% basic plus 20 or 22% cess

[skarthiksr]

Members please help me with this clarification. As per the above table, is the following inference correct?

1. Both Nexon and Ecosport are sub-4m cars. But, Nexon petrol engine is 1199 cc whereas Ecosport Petrol is 1496 cc. So as per the table, Nexon should be taxed at 29%, whereas Ecosport should be taxed at 50%(Context of Petrol). Is this correct?
2. Similarly, for Skoda Kushaq, I think 1L TSI is 999cc(< 1200cc) whereas 1.5 TSI is 1498cc. So, 1L TSI line-up should get better tax advantage(7%). Is this correct?

[rageshgr]

Yes. Mostly it’s like double the amount of car factory price is what your gross income must be
For example.
Ex factory price : 7 lacs
Ex showroom (40% gst) 10 lacs
OTR: 11.5 lacs
Gross income to earn roughly 11.5 post tax money: 13.5-14 lacs
So ex factory price 7 lacs
Income needed : 14 lacs.
So it’s like 7 lac car. 7 lac tax.

It gets worse in higher segments. For example a c class ex factory is 22 lac but u need to earn 50 lac to afford it