The Indian government’s modification of the GST system is set to reduce the prices of various products, notably including several popular car models. The revised rates, taking effect on September 22nd, will lead to price reductions for a number of vehicles, as the tax rate decreases from 28% to 18% for many cars. Small cars, vital to the passenger vehicle market in India, have experienced sales setbacks. However, the updated tax regulations are projected to stimulate their sales.
Currently, the tax system imposes a 28% GST and a 1% cess on small petrol cars with engines less than 1200cc and a length under 4 meters. Small diesel cars with engines under 1500cc and less than 4 meters in length face a 28% GST and a 3% cess, leading to a total tax of 31%. In contrast, large SUVs, featuring engines exceeding 1500cc and lengths surpassing 4 meters, are subject to a 50% tax, comprising a 28% GST and a 22% cess.
The new GST rules aim to simplify car taxation. Most small and mid-size cars will be categorized under the 18% tax bracket. Luxury vehicles and SUVs, however, will be taxed at 40%. Although some tax increases may occur, even luxury cars will witness reductions in overall taxation. Notably, small petrol cars with engines up to 1200cc and lengths under 4 meters will be subject to 18% GST. Likewise, small diesel cars with similar specifications will be taxed at 18%. Vehicles that do not meet these criteria will face a 40% tax.
Projected Savings
[Table of Car Models and Estimated Cost Savings]
Note: The prices shown in the table are the ex-showroom prices of the base models. The cost relief depends on the specific model’s price. Higher-priced models will have larger monetary savings from the GST adjustment.
Hyundai Creta
The Hyundai Creta, a highly popular SUV in India, will now be subject to a 40% GST. Previously, it was taxed at 43% (28% GST + 15% cess). Consumers can anticipate a price reduction of approximately 3%.
Mahindra Thar
The Mahindra Thar, an iconic off-road SUV in India, will see a tax reduction to 40% from a prior rate of 45-50%, dependent on the variant, under the new GST rules.
Mahindra Scorpio
The Mahindra Scorpio, like the Thar, will benefit from the cess removal, with its tax rate decreasing from 50% (28% GST + 22% cess) to 40% GST.
Toyota Innova Crysta
The Innova Crysta faced the same 50% tax rate as the Scorpio. With the revised regulations, this popular vehicle will also transition to a 40% tax.
In summary, a variety of cars will become more affordable. The extent of the savings will depend on the vehicle’s price, model, and segment. Smaller petrol cars are expected to have greater cost reductions, while savings for large SUVs may be around 5-10% in percentage terms. Despite the percentage difference, the financial relief will be substantial due to their elevated price points.