Changes to the Goods and Services Tax (GST) framework have led to price reductions for several items in the country. The new rates, effective from September 22nd, will also lower the prices of numerous popular cars as the tax will decrease from 28% to 18%. Small cars, a cornerstone of the Indian passenger vehicle market, have faced sales declines and market shrinkage recently, but the new tax rules are expected to boost their sales again.
Currently, small petrol cars with engines under 1200cc and less than 4 meters in length are subject to 28% GST and a 1% cess. Small diesel cars with engines under 1500cc and less than 4 meters in length face 28% GST and a 3% cess, resulting in a total tax of 31%. While the GST rate is 28% for these vehicles, the additional cess increases the overall tax. Large SUVs with engines above 1500cc and longer than 4 meters are taxed at 28% GST and a 22% cess, totaling 50%.
The government has simplified the car tax system with the new GST rules. Under the new rules, most small and mid-size cars fall under the 18% tax slab, while luxury and SUV cars will be taxed at 40%. Despite the increase, even luxury cars will have lower taxes than before. Now, small petrol cars with engines up to 1200cc and less than 4 meters in length will be subject to 18% GST. Additionally, small diesel cars with engines up to 1500cc and less than 4 meters in length will also face an 18% tax. Cars that do not fit these categories will be taxed at 40% GST.
Cars Benefiting from Tax Reduction:
| Car Model | Current Starting Price (in Rupees) | Estimated Relief After Tax 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 in the table are the ex-showroom prices of the base models, and the estimated relief is based on the price of the model. However, the higher the price of the model, the greater the relief from the GST reduction.
Hyundai Creta, one of India’s most popular SUVs, will now be subject to 40% GST. Previously, it was taxed at 28% GST and a 15% cess, totaling 43%. The price is likely to decrease by approximately 3%, offering some benefit to customers.
The Mahindra Thar, considered a true off-road SUV in India, previously faced taxes of up to 45-50%, depending on the variant. However, under the new GST rules, it will be taxed at only 40%.
The Mahindra Scorpio, most of its variants were previously taxed at 50% (28% GST + 22% cess), but with the cess removed, it will now be taxed at only 40% GST.
The Toyota Innova Crysta, similar to the Scorpio, was previously taxed at 50% with 28% GST and a 22% cess. Now, this popular car will be taxed at only 40%.
In summary, all types of cars will become cheaper. The amount of relief will depend on the price, model, and segment of the vehicle. Small petrol cars will see more relief, while larger SUVs will see relief in the range of 5-10%. However, due to the higher prices, the tax reduction amount will be larger, offering greater relief.
