The recent changes announced by the government have now come into effect, impacting the automobile sector significantly. The 56th GST Council meeting abolished the 12% and 28% tax slabs, leaving only the 5% and 18% slabs. This restructuring has led to a major overhaul in the taxation of vehicles. While buyers of small petrol and diesel cars will benefit, luxury and high-end electric vehicles are set to become more expensive. Under the new system, cars shorter than four meters with engines up to 1200cc (petrol) and 1500cc (diesel) will become cheaper. However, premium sedans, SUVs, and luxury cars will fall into the luxury goods category, attracting a 40% GST. This includes SUVs, MUVs, MPVs, or XUVs exceeding 4000mm in length and with a ground clearance of 170mm or more. Brands like BMW, Mercedes, Audi, Toyota Fortuner, and Mahindra XUV700 will be affected. Previously, all passenger vehicles attracted a 28% GST, plus an additional cess based on engine and body type. Electric vehicles had a 5% GST. The new system introduces a 40% special slab applicable to luxury and ‘sin’ goods.
