The government’s decision to reduce GST on cars is set to bring relief to consumers. This move will translate into significant savings for car buyers. Most automotive companies have already adjusted their prices to reflect the new GST 2.0 rates, which will take effect from September 22nd. This has led to questions about whether those who booked their cars before this date will also enjoy the benefits of the tax cut.
Buying a car is often a major financial undertaking, similar to purchasing a home. Many prospective buyers begin their research and planning months in advance. Some car models have long waiting lists, requiring pre-booking to secure a vehicle. With the upcoming festive season, many consumers likely made bookings to receive their cars during Navratri. These customers are now reaching out to dealerships, seeking clarification on whether they will be eligible for the reduced GST.
Will Early Bookings be Eligible for the GST Benefit? The answer is affirmative. A sales representative from Maruti Suzuki confirmed that any customer taking delivery of a car on or after September 22nd will benefit from the updated GST rates. This is because the applicable GST is calculated at the time of final billing, coinciding with the delivery date. Consequently, all customers will start seeing the price reduction from September 22nd, regardless of their booking date.
Will Deliveries Before September 22nd Benefit? The response is negative. If you take delivery of your car before September 22nd, the older, higher GST rates will apply. Therefore, those taking earlier deliveries will not receive the price reduction. The Federation of Automobile Dealers Associations (FADA) reported that sales in August were impacted by consumers delaying deliveries. Many were waiting for the GST reduction to take effect. The automotive body attributed this trend to anticipation of lower prices due to the ‘GST 2.0’ announcement.
Smaller Cars to Become More Affordable
Following the GST adjustments, smaller cars powered by petrol or CNG, featuring engines up to 1200cc and a length of up to 4000mm, will now be subject to an 18% tax. Previously, these cars were taxed at 29%. This tax reduction will benefit models like the Maruti Suzuki Alto K10, Maruti Suzuki Swift, Hyundai i20, Renault Kwid, and Tata Tiago, making them more affordable. Diesel cars with engines up to 1500cc and a length of up to 4000mm will also see price reductions, as their tax rate decreases from 31% to 18%. This includes cars like the Tata Altroz and Hyundai Venue.
Larger Cars to Remain Subject to Higher Taxes
Larger petrol and diesel cars will still be taxed at a higher rate than smaller cars, though the overall tax burden will be lower than before. Petrol cars with engines exceeding 1200cc and a length exceeding 4 meters will now be taxed at 40%, down from the previous 45% (28% GST and 17% cess). This category includes models such as the Maruti Suzuki Brezza, Maruti Suzuki XL6, Hyundai Creta, and Honda City. Diesel cars with engines larger than 1500cc will also be subject to a 40% tax, a decrease from the previous 48% (including a 20% cess). This applies to vehicles like the Tata Harrier, Tata Safari, Mahindra Scorpio-N, and Mahindra XUV700.