Introduction
The Indian automobile industry is buzzing with discussions around the proposed New GST reforms. The government is considering reducing the Goods and Services Tax (GST) on cars, which could make vehicles significantly more affordable for buyers.
Currently, the auto sector is taxed heavily, with small cars attracting 28% GST + cess, and even insurance premiums taxed at 18%. If these rates are slashed, buyers could see lakhs of rupees in savings on their dream cars.
To understand the real-world impact, let’s calculate the on-road price of the Volkswagen Virtus Highline Plus in Bangalore under the current GST regime vs the proposed new GST rates.
Current On-Road Price (with 28% GST & 18% Insurance GST)
For the Volkswagen Virtus Highline Plus (Manual, Petrol variant):
| Component | Amount (₹) | Explanation |
|---|---|---|
| Ex-showroom price | 13,87,900 | Includes manufacturer cost + GST (28%) |
| RTO (17% of Ex-showroom) | 2,35,000 | Karnataka state road tax slab |
| Insurance (with 18% GST) | 78,000 | Approx. premium for sedan in this price range |
| Other charges | 30,000 | Includes handling, accessories, fastag, etc. |
| Total On-road Price | 17,30,900 | — |
Current On-road Price = ₹17.3 Lakh
New On-Road Price (with 18% GST & 5% Insurance GST)
With the new GST structure, we assume:
- GST on cars reduces from 28% → 18%
- Insurance GST reduces from 18% → 5%
Step 1: New Ex-showroom price
If manufacturers pass on GST savings, ex-showroom price drops by approx. ₹1,00,000.
- New Ex-showroom = ₹12,87,900
Step 2: New RTO calculation
Road tax is 17% of ex-showroom.
- 17% of ₹12,87,900 ≈ ₹2,18,900
Step 3: New Insurance calculation
Insurance premium reduces due to lower GST.
- Old: ₹78,000 (with 18% GST)
- New: ≈ ₹65,000 (with 5% GST)
Step 4: Other charges remain same
- ₹30,000
Final On-Road Price (New GST Regime)
| Component | Current (₹) | New GST (₹) |
|---|---|---|
| Ex-showroom price | 13,87,900 | 12,87,900 |
| RTO (17%) | 2,35,000 | 2,18,900 |
| Insurance | 78,000 | 65,000 |
| Other charges | 30,000 | 30,000 |
| Total On-road Price | 17,30,900 | 16,01,800 |
New On-road Price = ₹16.0 Lakh
Savings for Buyers
- Current price: ₹17.3 Lakh
- New GST regime: ₹16.0 Lakh
- You save: ~₹1.3 Lakh
That’s nearly 7–8% cheaper, making a huge difference for middle-class car buyers.
Broader Market Impact
- Increased Demand: With lower prices, demand for new cars may rise, boosting automobile sales.
- Affordable Financing: Lower on-road prices reduce loan amounts and EMIs.
- Boost to Mid-segment Cars: Cars priced ₹10–20 lakh, like the Virtus, Honda City, Hyundai Verna, will see the highest savings.
- Insurance Sector Impact: Reduced GST on premiums makes ownership more affordable.
- Government Revenue vs Growth Trade-off: Short-term revenue loss due to lower GST, but higher sales volume may compensate.
Expert Take
Market analysts believe that price-sensitive Indian buyers will respond positively. Models like Virtus, Honda City, and Hyundai Creta could see a strong jump in sales. However, the extent of savings will depend on how much benefit carmakers pass on to customers.
Final Thoughts
The proposed GST cuts could be a game changer for India’s auto industry. For buyers, it’s an excellent opportunity to save over ₹1 lakh on mid-segment sedans like the Volkswagen Virtus Highline Plus.
If you are planning to buy a car, it may be worth waiting for the GST changes to be officially implemented before making the final decision.
Very useful blog for those who are planning to buy new car .. really it can save ur money