Why Your ₹8 Lakh Car Ends Up Costing ₹11 Lakh: A Breakdown of Hidden Expenses

Breakdown of GST, Cess, and Other Additional Costs
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For many Indian families, buying a car is a significant financial decision. However, the advertised price is just the beginning. What starts as an ₹8 lakh car can quickly become an ₹11-12 lakh investment. Let’s break down the additional costs that inflate the final price:

1. GST: A Major Contributor

Cars in India are subject to a hefty 28% Goods and Services Tax (GST). For a car priced at ₹8 lakh, this translates to an additional ₹2.24 lakh, significantly increasing the overall cost.

2. Cess: The Additional Surcharge

A 1% cess is levied on all car purchases, adding ₹8,000 for an ₹8 lakh vehicle. Though it may seem small, every extra charge adds up over time.

3. Insurance and Its Hidden Costs

Insurance is mandatory for every vehicle on Indian roads.

  • Basic insurance costs approximately ₹45,000.
  • On top of that, 18% GST on the insurance premium adds an additional ₹8,100.
  • The total insurance cost comes to ₹53,100.

4. Road Tax and Registration Fees

To legally drive your car, you need to pay road tax and registration charges. These state-imposed fees vary, but typically cost around ₹52,000 for an ₹8 lakh car.

The Final Calculation

When you add up GST, cess, insurance, and road tax, the total additional cost comes to nearly ₹3.40 lakh. As a result, the effective price of your ₹8 lakh car increases to approximately ₹11.40 lakh, an increase of 36%.

Plan Ahead for a Smooth Purchase

Before making a car purchase, it’s crucial to account for these hidden costs. Doing so will help you budget effectively and avoid unpleasant surprises at the dealership.

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