Changes in the GST framework are set to reduce the cost of many items across India, including automobiles. The revised tax rates, coming into effect on September 22nd, will see a reduction in the tax on numerous popular cars, moving from 28% to 18%. Small cars, integral to the Indian passenger vehicle market, have encountered sales declines and market contractions recently. The new tax regulations are intended to stimulate sales in this segment.
Currently, small petrol cars with engines below 1200cc and a length under 4 meters are subject to 28% GST and a 1% cess. Small diesel cars with engines under 1500cc and a length under 4 meters are taxed at 28% GST and a 3% cess, leading to a total tax of 31%. Although the GST rate is 28% for these vehicles, the addition of a cess increases the total tax burden. In contrast, large SUVs, with engines exceeding 1500cc and a length exceeding 4 meters, are taxed at 28% GST plus a 22% cess, resulting in a 50% tax.
The government has streamlined the car tax system with the new GST rules. Under these new rules, most small and mid-size cars will be subject to the 18% tax rate, while luxury and SUV cars will be taxed at 40%. Despite the increase, luxury cars will be taxed at a lower rate than before. Small petrol cars with engines up to 1200cc and less than 4 meters in length will now be taxed at 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 that do not meet these criteria will be subject to a 40% GST.
Estimated Price Reductions for Select Models:
| 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 listed are based on the ex-showroom prices of the base models, and the estimated savings depend on the price of the specific model. Higher-priced models will benefit from a greater tax reduction.
The Hyundai Creta, a popular SUV in India, will now be subject to 40% GST. Previously, the Creta was taxed at 43%, comprising 28% GST and a 15% cess. This is expected to reduce the price by approximately 3%, providing savings for customers.
The Mahindra Thar, recognized as a true off-road SUV in India, was previously taxed at rates up to 45-50%, depending on the variant. The new GST regulations will bring this down to a 40% tax.
The Mahindra Scorpio, previously taxed at 50% (28% GST + 22% cess) for most variants, will see its tax reduced to 40% GST after the cess is removed.
The Toyota Innova Crysta, similar to the Scorpio, previously had a tax rate of 50%, consisting of 28% GST and a 22% cess. The tax on this well-liked car will now be only 40%.
In general, all car models are expected to see price reductions. The amount of savings will vary based on the vehicle’s price, model, and segment. For example, small petrol cars are likely to see the greatest savings, while larger SUVs might see reductions of 5-10%. However, due to the higher prices, the tax reduction amount will be greater, resulting in larger savings for consumers.