The Indian government’s adjustments to the GST structure are set to make several items, including cars, more affordable. The new tax rates, which come into effect on September 22nd, will see the tax on many popular cars reduced from 28% to 18%. Small cars, which have been a crucial part of the Indian passenger vehicle market, have been facing challenges in sales and shrinking market size. The new tax regulations aim to give these cars a boost.
Presently, small petrol cars with engines under 1200cc and under 4 meters in length are taxed at 28% GST plus a 1% cess. Small diesel cars, with engines smaller than 1500cc and lengths under 4 meters, are taxed at 28% GST and a 3% cess, resulting in a total tax of 31%. Although the GST rate is 28% for these vehicles, the additional cess increases the overall tax burden. Larger SUVs, with engines exceeding 1500cc and lengths longer than 4 meters, are subject to a 28% GST and a 22% cess, adding up to a total tax of 50%.
The government has simplified the taxation system for cars with the new GST rules. Under the new GST regulations, most small and mid-size cars will fall into the 18% tax bracket, while luxury and SUV cars will be taxed at 40%. Despite the rise, luxury cars will be taxed less than before. Small petrol cars with engines up to 1200cc and under 4 meters in length will now be subject to an 18% GST. Likewise, small diesel cars with engines up to 1500cc and less than 4 meters in length will also be taxed at 18%. Vehicles not meeting these specifications will be taxed at 40% GST.
Estimated Price Drops:
| Car Model | Current Starting Price (in Rupees) | Estimated Price Reduction (in Rupees) |
|—|—|—|
| Alto K10 | 4.23 Lakh | 42 thousand |
| Maruti Suzuki Swift | 6.49 Lakh | 60 thousand |
| Maruti Suzuki Dzire | 6.84 Lakh | 65-68 thousand |
| Hyundai Grand i10 | 5.98 Lakh | 47 thousand |
| Maruti Suzuki S-Presso | 4.26 Lakh | 43 thousand |
| Tata Tiago | 5.65 Lakh | 50 thousand |
| Tata Nexon | 8.0 Lakh | 80 thousand |
| Maruti Suzuki Wagon | 5.79 Lakh | 55 thousand |
| Maruti FRONX | 7.58 Lakh | 75 thousand |
| Maruti Baleno | 6.74 Lakh | 67 thousand |
Note: The prices of the cars mentioned in the table are based on the base model’s ex-showroom price, and the estimated savings are according to the model’s price. However, the more expensive the model, the greater the relief from the GST reduction.
The Hyundai Creta, one of India’s most popular SUVs, will now be subject to 40% GST. Previously, this car was taxed at 43%, which included a 28% GST and a 15% cess. As a result, the price is expected to fall by about 3%, which should be beneficial for customers.
The Mahindra Thar, a true off-road SUV in India, previously faced taxes of up to 45-50%, depending on the variant. However, with the new GST rules, this SUV will be taxed at just 40%.
The Mahindra Scorpio, previously taxed at 50% (28% GST + 22% cess) for most variants, will now be taxed at only 40% GST after the removal of the cess.
The Toyota Innova Crysta, similar to the Scorpio, previously had a tax of 50%, comprising 28% GST and 22% cess. This well-liked car will now be taxed at only 40%.
In summary, all types of vehicles are expected to become more affordable. The price reduction will vary depending on the vehicle’s price, model, and category. For instance, small petrol cars are likely to see the greatest reductions, whereas larger SUVs might see relief of 5-10%. Nevertheless, due to the greater prices, the tax cut will be larger, leading to greater savings.
