The Indian government has announced new Goods and Services Tax (GST) rates for cars, responding to the automotive industry’s push for lower taxes to encourage car ownership. India, while being a top car market globally, experiences a low rate of car adoption per capita.
Following the 56th GST Council meeting, the tax rate for small cars has been reduced to 18% from 28%. Larger vehicles, including SUVs, will now be taxed at 40% without any extra cess, leading to an overall reduction in the tax burden. Electric cars will continue to have a 5% GST rate, while all auto components, irrespective of the car they are used in, are taxed at 18%.
Small cars are defined as those under four meters in length, using engines below 1,200 cc for petrol/CNG/LPG and below 1,500 cc for diesel. Cars exceeding these specifications will fall under the 40% GST bracket.
Updated GST rates are now in effect across a range of car models, including entry-level to luxury options in the mass-market. Various brands and models, such as those from Maruti Suzuki, Mahindra, Hyundai, Tata Motors, KIA India, Toyota India, JSW MG Motor, Honda Cars India, Renault/Nissan, and Skoda/VW, are impacted.
Consumers considering cars with a slightly larger engine capacity (1500cc) will face the 40% GST. This may particularly affect vehicles used in mountainous regions. Likewise, motorcycles with engines exceeding 350 cc will be taxed at a higher rate.