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GST steers car prices downhill as makers look to pass on benefits

July 1, 2017 4:18 PM
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GST steers car prices downhill as makers look to pass on benefits

The cut is expected to be a trigger for expansion of sales in the world's fifth-largest car market

Maruti Suzuki, which sells every second car in the country, has passed on the entire benefit of GST rates on vehicles to its customers, the company said in a statement. “The rate of reduction varies across locations depending on the value added tax (VAT) rates applicable prior to GST,” it said. In states where the VAT was 14.5 per cent (most states had this rate), price of Maruti’s bestseller, Baleno, will come down by Rs 6,600-13,100 while its SUV, Brezza, will be cheaper by Rs 10,400 to Rs 14,700. The minimum price cut would be on the entry-level Alto (Rs 2,300-5,400) and the maximum decrease is on the S Cross (Rs 17,700-21,300).

Owing to the withdrawal of tax concessions on mild hybrid vehicles, the price of the smart hybrid Ciaz (diesel) and smart hybrid Ertiga (diesel) has increased by over 10 per cent — about Rs 1,00,000. “While GST will directly improve efficiencies and ease of business, its significance goes much beyond that. It is a powerful example of India’s commitment to reform,” Kenichi Ayukawa, managing director and chief executive officer at Maruti Suzuki, said.

Japanese automaker Toyota has cut prices of its vehicles by up to Rs 2,17,000. Its entry-level model, Liva, gets cheaper by Rs 10,500 while the Fortuner SUV is cheaper by Rs 2,17,000. Innova, its bestseller, is down by up to Rs 98,500. The Camry hybrid, however, will be expensive by Rs 3,50,000.

Meanwhile, Hyundai, India’s second-largest carmaker, is working on the post-GST pricing and an announcement is expected in next couple of days. Every player will revise price in line with the new tax to avoid attracting the anti-profiteering clause. GST, which subsumes all central and state level taxes, has removed the inter-state variation in taxes. All cars now have a GST of 28 per cent. Besides this, a cess of 1 per cent on small (less than 1,200cc) petrol cars and three per cent cess on small (less than 1,500cc) diesel cars is getting levied. There is a 15 per cent cess on larger SUVs and luxury vehicles. This cess is also applicable to hybrid vehicles. Electric vehicles have the lowest GST of 12 per cent.

Tata Motors-owned luxury carmaker JLR has cut prices of its cars by a minimum five per cent and a maximum 8.6 per cent. The price of Discovery Sport (diesel), for instance is down by Rs 3,76,446, to Rs 40,00,000. German luxury carmaker Mercedes-Benz has cut prices of its vehicles by a minimum two per cent and a maximum nine per cent.

“We are looking forward to this simplified tax structure that will create a single market across India and benefit both the buyer and the seller. There may be initial teething issues but we are confident that there will be promising long term gains,” said Roland Folger, managing director and chief executive officer at Mercedes-Benz India. .


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