2 Percent Tax Hike on Diesel Cars: Ministry of Road Transport and Highways has proposed 2% increase in GST over cars carrying diesel engines. This will result in increase of price for all Indian diesel cars, irrespective of their length, size or engine size.
Present GST value on cars is higher than most nations as their is a great difference in taxes introduced in July 2017 and those applicable in April 2018. Petrol cars under 4 meter carry 29% GST while those coming with diesel engine under same length carries 31% GST. Adding this 2% will result in 33% GST on small diesel cars in India.
Cars with length over 4 meter have been listed under luxury segment as government now imposes flat 53% GST on all cars, whether they carry small engine, big engine or fall under SUV category. This change was implemented from January 1, 2018.
Now, after the 2% increase in GST on diesel cars is implemented, these cars will split into two different sections where petrol engines of same car will attract 53% GST while diesel will be charged with 55%. For example, Toyota Fortuner Petrol will still carry INR 26.20 lakh price while Fortuner Diesel will get considerable price hike (INR 36,000 approx).
The move is not at all positive for automotive sector as buyers prefer diesel as fuel for most SUVs and luxury cars in India. High torque requirement is fully managed by diesel engine while petrol engine of same size may not feel as effective in terms of weight management and pulling power.
Taxes on cars in India is one among the highest when compared to countries were sales are even big in number than India. Growth stalls with this big number as after 2% increase, customer will need to pay 55% tax (above 4m) on a locally manufactured diesel car in India.