I took an i10 magna. The exshowroom price was quoted to me by one of the dealer was 396181. This includes VAT that is 12.5 % of base price. That means in this case the base price of car is 352160 and the VAT will be 44021. I was getting a corporate discount of Rs. 4000 and free insurance of worth 12000 from Hyundai. So as a final quotation he gave me the price 396181-4000=392181, But from this he will pay the (VAT baseprice - 4000 = carprice) + 12.5% of carprice .
So he just ate up your Rs.500 from your discount. Think how much he getting from the insurance 12000. I called hyundai and they confirmed me that the discounts should be given on base price and then the VAT should be calculated. So when buying ask ur dealer to give discount on baseprice. also tell him discount the insurance price from base price and later you will pay the insurance money. This way you will save a lot of money on VAT which the dealer eats up.