In India it is a big achievement or indicator of status as well as convenience among many people, but Tax attached Purchasing a new car. However, it is important to know that this purchase incurs several taxes that can a have an added cost on the purchase. Here is the step by step guide for the taxes and charges for the new car buyers in India which we will discuss in this article.
1. Genuine Simulated Tax (GST)
A common tax attached to the purchase of a new car in India is the GST or Goods and Services Taxes. Launched in the fiscal year 2017-18, GST is an indirect tax levied on the supply of goods and services in India. For the automotive sector, the GST rates vary based on the type of vehicle:
- Small cars (under 4 meters in length and under 1,200 cc engine capacity): 18% GST.
- Mid-sized cars (between 4 meters and 1,200 cc to 1,500 cc engine capacity): 28% GST.
- Luxury cars and SUVs (over 4 meters in length and above 1,500 cc engine capacity): 28% Goods and Service Taxes plus another charge available from 1% to 22% on the basis of the type of a vehicle.
For instance, if you go for a luxury SUV, that costs ₹30 lakh, the GST and cess would be even higher, thus making the automobile a great deal pricier.
2. Road Tax
After purchasing a car, another cost that one has to incur is the road tax, which is a tax paid depending on the state. In India, the calculation of road taxes varies from state to state depending on the value, age and engine capacity of the car. The taxes shall be a lump sum or an annual charge and it can be between 1% and 20% of the purchase price of the vehicle although this depends with the laws of the state in question.
For instance, the road tax for a ₹10 lack valued car may cost around 1.5 lakh in Maharashtra whereas that in Karnataka may differ. Depending on where you live, road tax may vary and it is recommended to find out specifically what your state charges when calculating for new car purchases.
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3. Registration Fees
In order to use your new car on the road legally as per Indian laws, it has to be registered with the local RTO or Regional Transport Office. The registration fee can also differ depending on the state, but it contains a fixed part and variable that depend on the price of the vehicle. Usually, this charges vary from as low as ₹300 to ₹1,000 for average cars and trucks and go upward for fancy and commercial vehicles. Besides the registration fee, you may require purchasing a license plate that costs about ₹500 to ₹1,000, depending on the type or design that you want to apply for.
4. Insurance Premium
An important cost incidental to the purchase of automobiles but not a tax is the insurance of the vehicle for use in India. The Act also specifies that third-party liability insurance is mandatory for all new motor vehicles purchased after the Motor Vehicles Act of 1988 was passed. It can be processed through the insurance company of the owner’s choice and the cost depends on the make, model, and valueof the car. Third party liability and own car damage are usually advised and are normally much more expensive than basic policy.
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5. Additional Taxes and Charges
Therefore, the additional tax and fees other than the primary tax that may be incurred when buying a new car include, These include:
- Cess: With regard to the previous points, some categories of vehicles are chargeable with extra cess. For example, the cess on electric vehicles may be lower to encourage consumers to use vehicles that do not harm the environment.
- Road Safety and Environmental Charges: Additional charges set by some states are surcharges that may serve to boost road safety and abate environmental impacts.
- Handling and Delivery Charges: These costs are additional charges made by the dealers and which may include the cost of preparing the vehicle for delivery and which may widely differ.
6. Tax Concessions
It is also important for those using their vehicle for business at some point to know that there are specific taxes that may be claimed. By the provision of Section 80C depending on the Income Tax Act, individuals is allowed to offset their income by every amount they spend or borrowed on acquiring the vehicles intended for business use.
Conclusion
While planning to buy a new car in India, one has to consider not only the cost of the car but the taxes and the charges that follow it. Considering the consequences of applying GST, road taxes, registration fees and insurance costs would therefore help in decision making. Moreover, knowledge of the existing taxes benefits can help save money in case the car is needed for business purposes. When integrating these aspects, it is possible to make a sound decision on the car to purchase thus making car purchase a good experience.
