The government has announced new GST slabs, with a 40% tax on petrol cars above 1200cc and diesel cars above 1500cc. The length of the cars should not exceed 4 meters. Consequently, cars like Kia, Creta, Hyundai, and Nexon, among others, are expected to become cheaper.
Under the new system, cars up to 4 meters in length with engines up to 1200cc (petrol) or 1500cc (diesel) will now attract only 18% GST. Previously, these cars were subject to taxes of 29-31%. This means that cars like Maruti Alto, Tata Punch, and Hyundai Grand i10 will now be thousands of rupees cheaper.
On the other hand, cars longer than four meters with petrol engines exceeding 1200cc or diesel engines exceeding 1500cc now fall into the luxury goods category. A 40% GST will be directly applied to these. This includes popular SUVs like Creta, Kia Seltos, Hyundai Alcazar, Tata Harrier, XUV700, and Innova Hycross.
The government has also made ground clearance a basis for tax determination, in addition to engine capacity and length. Vehicles exceeding 4 meters in length, with engines above 1500cc and ground clearance of 170mm or more, will also be subject to a 40% tax.
The reduction in taxes on small cars will directly affect customers. If a car costs ₹5 lakh, it could become cheaper by around ₹62,500. This decision is good news for entry-level buyers who have been away from the market due to rising prices. Similarly, two-wheelers with engines up to 350cc will also have their tax reduced from 28% to 18%. This means models like Hero Splendor, Honda Activa, and TVS Jupiter will become more affordable.
