Following a government decision, new GST slabs have been announced, potentially making various vehicles more affordable. Petrol vehicles with engines larger than 1200cc and diesel vehicles with engines larger than 1500cc will be subject to a 40% tax. The length of these vehicles should not exceed 4 meters. This will impact the pricing of vehicles like Kia, Creta, Hyundai, and Nexon, among others.
The GST Council has recently implemented GST 2.0, leading to changes in the automotive sector. This new tax structure is particularly beneficial for buyers of smaller cars and two-wheelers. It will also offer financial relief to purchasers of luxury cars and larger SUVs. For passenger vehicles (petrol, CNG, LPG) that are up to 4 meters in length and have a 1200cc engine, savings are anticipated.
Under the revised system, cars with a length of up to 4 meters that have engines up to 1200cc (petrol) or 1500cc (diesel) will now be subject to only an 18% GST. Previously, these cars were taxed at rates between 29-31%. This will result in decreased prices for cars like the Maruti Alto, Tata Punch, and Hyundai Grand i10.
Vehicles exceeding four meters in length with petrol engines over 1200cc or diesel engines over 1500cc will be classified as luxury goods and taxed at 40%. This includes popular models such as Creta, Kia Seltos, Hyundai Alcazar, Tata Harrier, XUV700, and Innova Hycross.
The government has also considered ground clearance in its tax determination. Vehicles exceeding 4 meters in length, having engines above 1500cc and a ground clearance of 170mm or higher, will be subject to a 40% tax.
Lower taxes on smaller cars will directly translate into lower prices for consumers. For example, a car priced at ₹5 lakh could become around ₹62,500 cheaper. This is good news for entry-level buyers, who had been hesitant due to rising prices. Furthermore, two-wheelers with engines up to 350cc will have their tax reduced from 28% to 18%. This will make models like Hero Splendor, Honda Activa, and TVS Jupiter more affordable.