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Changes to the Goods and Services Tax (GST) framework have led to price reductions for numerous items in the country. The new rates, effective September 22nd, will result in lower prices for several popular cars, as the tax on them will be reduced from 28% to 18%. Small cars, which have been the backbone of the passenger vehicle market in India, have faced declining sales and a shrinking market recently, but the new tax rules are expected to boost their demand again.
Currently, small petrol cars with engines less than 1200cc and under 4 meters in length are subject to 28% GST and a 1% cess. Small diesel cars with engines less than 1500cc and under 4 meters in length face 28% GST and a 3% cess, totaling 31% tax. While the GST rate is 28%, the additional cess increases the overall tax. Large SUVs with engines above 1500cc and over 4 meters in length attract a total of 50% tax, comprising 28% GST and a 22% cess.
The new GST rules simplify the tax system for cars. Under the new regulations, most small and mid-size cars will fall under the 18% tax bracket, while luxury and SUV cars will be taxed at 40%. Despite the increase, even luxury cars will see a tax reduction. Small petrol cars with engines up to 1200cc and under 4 meters in length will now be subject to 18% GST. Furthermore, small diesel cars with engines up to 1500cc and under 4 meters in length will also be taxed at 18%. Cars not falling into these categories will be subject to a 40% GST.
Tax Reduction on Cars
[Table of Car Models and Estimated Price Reductions]
Note: The prices in the table are the ex-showroom prices of the base models, and the amount of relief will vary based on the model’s price. However, as the price of the model increases, the relief from the GST reduction will also increase.
Hyundai Creta
The Creta, one of India’s most popular SUVs, will now be subject to 40% GST. Previously, it faced a tax of 43%, which included 28% GST and a 15% cess. The price is expected to drop by approximately 3%, which will benefit customers.
Mahindra Thar
The Thar, considered a true off-road SUV in India, previously faced taxes up to 45-50%, depending on the variant. Under the new GST rules, it will be taxed at just 40%.
Mahindra Scorpio
Most variants of the Scorpio currently have a 50% tax (28% GST + 22% cess), but with the removal of the cess, it will now be taxed at only 40% GST.
Toyota Innova Crysta
Similar to the Scorpio, the Innova Crysta previously had a 50% tax (28% GST + 22% cess). This popular car will now be taxed at only 40%.
Overall, all types of cars will become cheaper. The amount of relief will depend on the price, model, and segment. For small petrol cars, there will be greater relief, while for large SUVs, the relief will be in the range of 5-10%. However, due to the higher prices, the tax cut will be significant, providing substantial relief.
