GST changes to make small cars and two-wheelers cheaper ahead of festive season
text_fields
New Delhi: Prices of small cars, two-wheelers and even large SUVs are set to come down as the GST Council has approved major changes to the indirect tax structure ahead of the festive season.
Under the new system, effective from September 22, the country will move to a two-tier tax structure of 5 per cent and 18 per cent, bringing down rates on several daily-use goods as well as automobiles.
Small cars will see the biggest relief, with GST on vehicles under four meters in length now fixed at 18 per cent, compared with the current levy of 29-31 per cent. This applies to cars with petrol engines up to 1,200 cc and diesel engines up to 1,500 cc. Similarly, motorcycles with engines below 350 cc will also be taxed at 18 per cent instead of the existing 28 per cent.
Industry experts estimate the reduction will lower ex-showroom prices of small cars by 12-12.5 per cent. For instance, a vehicle priced at Rs 5 lakh could see a cut of about Rs 62,500.
Larger vehicles will also get some respite, with SUVs and other cars longer than four meters to be taxed at 40 per cent, compared with 43-50 per cent at present, including cess.
The decision to bring auto parts under a uniform 18 per cent GST slab, down from 28 per cent, is also expected to ease costs across the supply chain.
Gaurav Vangaal, associate director at S&P Global Mobility, noted that brands such as Maruti, Tata and Mahindra are likely to benefit most, particularly with rising demand for compact crossovers like the Fronx and Punch.
