Small, medium car costs to rise may see small hike in prices under GST

Central, state taxes will be unified

Small and mid-sized cars may see a small hike in prices after the Goods and Services Tax (GST) is rolled out from July 1 as different goods are fitted into the four-slab rate structure.

The GST will unify at least 10 central and state taxes into one.

Goods and services will have to fall into one of the approved four rate categories of 5, 12, 18 and 28 per cent, which is closest rate to the present incidence of taxation.

Small cars currently attract a 12.5 per cent central excise duty. Another 14.5-15 per cent VAT is levied by states, with total tax incidence 27-27.5 per cent.

A senior finance ministry official said the closed slab for this category of cars would be 28 per cent, resulting in a small increase in price.

Mid-sized cars of up to 1500 cc are levied with a 24 per cent excise by the the central government and a 14.5 per cent VAT by state governments, taking the tax incidence to 38.5 per cent.