The Indian government has introduced GST reforms, aiming to increase consumer spending and stimulate market demand. The automobile industry is optimistic about the impact of these changes, especially during the upcoming festive season.
Electric vehicles will continue to have a 5% GST. Small cars (4 meters and under, 1200cc engine) will now have an 18% tax, a significant drop from the previous 28%. This benefits buyers and gives car companies a chance to boost sales. Premium SUVs, high-end EVs, and luxury cars are now taxed at 40%. The removal of the cess means consumers can now more easily afford larger, stylish vehicles.
A key decision from the GST meeting was the removal of the compensation cess. This is viewed as a practical move for the industry. Dealers will receive input tax credit on old stock. The new rates will take effect on September 22nd, coinciding with the start of Navratri, which is a peak buying period for vehicles in India.
However, there are some concerns that some states might look to increase vehicle registration charges to compensate for revenue losses, which could increase costs for consumers. Also, for two-wheelers, there has been a 9% increase in tax on motorcycles above 350cc.