The Indian government’s adjustments to the GST structure are set to reduce the prices of numerous goods, including automobiles. New GST rates, slated to be implemented from September 22nd, will see a shift from a 28% tax rate to an 18% rate for certain vehicles, leading to price reductions on popular models. Small cars, which form a significant portion of the passenger vehicle market in India, have been experiencing sales challenges and market contraction. These revised tax regulations are anticipated to revitalize sales.
Currently, petrol-powered cars with engines smaller than 1200cc and shorter than 4 meters in length are taxed at 28% GST plus a 1% cess. Diesel cars, with engines under 1500cc and a length below 4 meters, face a 28% GST and a 3% cess, resulting in a total tax burden of 31%. Despite the 28% GST rate, the additional cess inflates the overall tax. Conversely, larger SUVs, with engines exceeding 1500cc and surpassing 4 meters in length, are subject to a 28% GST and a 22% cess, culminating in a 50% tax.
Under the new GST framework, the tax system for cars has been streamlined. The majority of small and mid-size cars will now fall under the 18% tax bracket, while luxury and SUV models will face a 40% tax. Even with the elevated tax rate for luxury cars, this represents a decrease compared to previous rates. Small petrol cars, with engines up to 1200cc and under 4 meters long, will now be subject to an 18% GST. Similarly, small diesel cars with engines up to 1500cc and less than 4 meters in length will also be taxed at 18%. Vehicles not fitting these criteria will be taxed at a 40% GST.
Estimated Price Reductions:
| Car Model | Current Starting Price (in Rupees) | Estimated Price Reduction (in Rupees) |
|—|—|—|
| Alto K10 | 4.23 Lakh | 42 thousand |
| Maruti Suzuki Swift | 6.49 Lakh | 60 thousand |
| Maruti Suzuki Dzire | 6.84 Lakh | 65-68 thousand |
| Hyundai Grand i10 | 5.98 Lakh | 47 thousand |
| Maruti Suzuki S-Presso | 4.26 Lakh | 43 thousand |
| Tata Tiago | 5.65 Lakh | 50 thousand |
| Tata Nexon | 8.0 Lakh | 80 thousand |
| Maruti Suzuki Wagon | 5.79 Lakh | 55 thousand |
| Maruti FRONX | 7.58 Lakh | 75 thousand |
| Maruti Baleno | 6.74 Lakh | 67 thousand |
Note: The provided prices represent the ex-showroom prices for the base models. The extent of the tax reduction will vary with the car’s model and its price point. Higher-priced models will experience more substantial savings.
The Hyundai Creta, one of the most sought-after SUVs in India, will now attract a 40% GST. Previously, the Creta was taxed at a combined rate of 43%, including 28% GST and a 15% cess. The price is likely to decline by roughly 3%, which should benefit consumers.
The Mahindra Thar, a quintessential off-road SUV in India, was previously subject to taxes ranging from 45% to 50%, contingent on the variant. Under the new GST regime, the Thar will be taxed at a flat rate of 40%.
The Mahindra Scorpio, experienced a previous tax rate of 50% (28% GST plus 22% cess) across most of its variants. The elimination of the cess will see the Scorpio taxed at 40% GST.
The Toyota Innova Crysta, mirroring the Scorpio, was previously subject to a 50% tax, consisting of 28% GST and a 22% cess. This popular vehicle will now be taxed at 40%.
Overall, the prices of all car models are expected to decrease. The degree of price reduction will vary depending on the vehicle’s cost, model, and segment. For instance, small petrol cars can anticipate greater savings, while larger SUVs might witness savings between 5-10%. However, the absolute tax reduction will be more significant for higher-priced vehicles, translating into more considerable savings.