Comparing New and Used Cars: The Impact of Taxes and GST on Car Prices in India, Including Road Tax and More

Taxes and GST on New Cars and Used Cars in India: A Comprehensive Guide

When buying a car in India, whether new or used, understanding the taxes and GST (Goods and Services Tax) is crucial. These costs, levied by both the Central and State Governments, significantly impact the final price. Let’s break it down with a special focus on the popular Maruti Suzuki Brezza Base Variant as a reference.

Taxes on New Cars in India

Purchasing a new car involves multiple layers of taxation and charges. Here’s a detailed breakdown:

1. GST (Goods and Services Tax):

The GST rates on new cars depend on the car’s type and engine size:

For the Maruti Suzuki Brezza Base Variant (engine capacity: 1462cc, length: > 4 meters), the applicable GST is 28% + 15% Cess, categorizing it as a mid-size car.

2. Road Tax:

State Governments impose road tax, varying between 8% and 15% of the ex-showroom price. This rate differs across states.

3. Registration Charges:

Registration fees, determined by the car’s price and state, typically range from Rs. 1,000 to Rs. 10,000.

4. Insurance Premium:

Though not a tax, insurance is mandatory and includes third-party coverage and optional comprehensive policies.

5. Other Charges:

Additional fees include pollution certificate charges, dealer handling charges, and infrastructure cess.

Taxes on Used Cars in India

The tax system for used cars differs but includes notable charges:

1. GST on Used Cars:

GST on used cars applies under the margin scheme only on the dealer’s profit margin, not the entire sale price:

2. Road Tax Transfer:

A nominal fee is required to transfer the road tax from the previous owner to the buyer. This cost varies by state.

3. Registration Transfer Charges:

Registration transfer fees range from Rs. 300 to Rs. 1,000, depending on the vehicle’s age and the state.

What Consumers Actually Pay

The ex-showroom price is just the starting point. After adding GST, road tax, insurance, and other charges, the on-road price can be significantly higher. For example, the Maruti Suzuki Brezza Base Variant-with an ex-showroom price of approximately Rs. 8 lakh-may cost Rs. 9.5 lakh to Rs. 10 lakh on-road, depending on the state.

Here’s a sample calculation for better clarity:

Why Do Taxes Vary Across States?

In India, road tax is a state-specific levy, leading to significant variations. States like Karnataka and Maharashtra impose higher road taxes, while Himachal Pradesh and Uttarakhand have comparatively lower rates. This is why on-road prices for the same car can differ significantly across states.

Tips for Car Buyers

1. Compare On-Road Prices: Always check the on-road price instead of the ex-showroom price for a complete cost understanding.
2. Understand Used Car Taxes: If buying a pre-owned vehicle, factor in GST and transfer fees.
3. Opt for Tax-Friendly States: If feasible, purchase in a state with lower road taxes to save money.
4. Negotiate Dealer Charges: Handling fees and other charges can often be negotiated.

Conclusion

Taxes and GST significantly affect the cost of cars in India. Whether it’s a new Maruti Suzuki Brezza or a used car, being aware of these charges ensures you make an informed decision. Use this guide to navigate the complex tax structure and enjoy a hassle-free car-buying experience!