After considerable anticipation, the Indian government has implemented GST reforms. The aim of these revisions is to boost market consumption and provide consumers with more disposable income. The automotive sector has expressed its approval of these changes, anticipating a rise in demand, particularly during the festive season.
Under the new tax structure, electric vehicles will continue to be taxed at 5 percent GST. Additionally, small cars, those up to 4 meters in length with 1200cc engines, will now be subject to an 18 percent tax, reduced from the previous 28 percent. This reduction will be advantageous for small car purchasers and will also allow companies to increase their sales.
The government’s reforms also extend to premium SUVs, high-end EVs, and luxury cars, which will now be taxed at 40 percent. The removal of the cess previously imposed on these vehicles allows consumers to consider the purchase of larger and more stylish cars.
Dealers will benefit from input tax credit on their old stock, permitting them to accumulate a substantial inventory prior to the holiday season. However, clarification is still needed regarding the handling of the cess balance in dealers’ books.