The Indian government’s adjustments to the GST structure are poised to make a wide array of goods and services more affordable. The new GST rates, commencing September 22nd, will trigger price reductions for several of India’s most sought-after vehicles. These changes stem from a revision where the tax rate on many cars shifts from 28% to 18%. Small cars, vital to India’s passenger vehicle market, have faced challenges recently, but the altered tax regulations are expected to reignite sales.
Currently, the tax structure involves a 28% GST and a 1% cess for small petrol cars with engines below 1200cc and lengths under 4 meters. Small diesel cars, with engines under 1500cc and lengths under 4 meters, face a 28% GST plus a 3% cess, totaling 31% tax. Large SUVs, with engines exceeding 1500cc and lengths over 4 meters, are taxed at a substantial 50%, composed of 28% GST and a 22% cess.
The new GST regime simplifies car taxation. Under the revised rules, most small and mid-size cars will be placed within the 18% tax bracket. Luxury and SUV models, however, will be subject to a 40% tax. Despite the increase in some instances, luxury cars will also benefit from reduced overall taxation. Specifically, small petrol cars with engines up to 1200cc and lengths under 4 meters will be taxed at 18% GST. Furthermore, small diesel cars within the same dimensional criteria will also be taxed at 18%. Vehicles not meeting these classifications will be taxed at the 40% rate.
Projected Tax Reductions
[Table of Car Models and Anticipated Price Drops]
Note: The pricing in the table represents the ex-showroom prices of the base models. The price reduction will be relative to the model’s value. Higher-priced models will see greater monetary savings from the GST adjustments.
Hyundai Creta
The Hyundai Creta, a top-selling 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 about 3%.
Mahindra Thar
The Mahindra Thar, an icon in the off-road SUV segment in India, will see its tax rate decrease from up to 45-50% to a flat 40% under the updated GST rules.
Mahindra Scorpio
The Mahindra Scorpio, similar to the Thar, will benefit from the removal of the cess. Its tax rate drops from 50% (28% GST + 22% cess) to 40% GST.
Toyota Innova Crysta
The Innova Crysta previously faced the same 50% tax rate as the Scorpio. With the new rules, it too will transition to a 40% tax.
In essence, a wide range of vehicles will become more affordable. The extent of the savings will depend on the vehicle’s price, model, and segment. Small petrol cars are slated to receive a larger benefit compared to large SUVs, where the savings may be around 5-10% in percentage terms. Despite the smaller percentage, the monetary relief will be substantial due to the higher price points.