The recent alterations to the GST structure in India are expected to lower the prices of numerous goods, including several popular car models. With the implementation of new rates from September 22nd, consumers can anticipate price decreases as the tax on many vehicles drops from 28% to 18%. Small cars, which play a crucial role in the Indian passenger vehicle sector, have faced sales challenges; however, these tax reforms are expected to revitalize their demand.
Currently, small petrol cars with engines below 1200cc and less than 4 meters in length are taxed at 28% GST plus a 1% cess. Small diesel cars with engines under 1500cc and lengths below 4 meters face a 28% GST and a 3% cess, resulting in a total tax of 31%. Conversely, large SUVs with engines over 1500cc and exceeding 4 meters in length are subject to a combined 50% tax, incorporating 28% GST and a 22% cess.
The revised GST framework introduces simplicity in car taxation. Under these new regulations, the majority of small and mid-size cars will fall under the 18% tax slab. However, luxury vehicles and SUVs will be taxed at 40%. Despite potential tax increases in some instances, luxury cars will also experience reduced overall taxation. Notably, small petrol cars with engines up to 1200cc and lengths under 4 meters will be subject to 18% GST. Similarly, small diesel cars with comparable specifications will be taxed at 18%. Vehicles that do not meet these classifications will be taxed at the 40% rate.
Projected Price Reductions
[Table of Car Models and Expected Cost Savings]
Note: The prices shown in the table represent the ex-showroom prices for the base models. The cost relief will vary with the specific model’s price. Higher-value models will benefit from larger monetary savings derived from the GST adjustment.
Hyundai Creta
The popular Hyundai Creta SUV will now be subject to a 40% GST. Previously, it was taxed at 43% (28% GST + 15% cess). Consumers can anticipate a reduction in price of approximately 3%.
Mahindra Thar
The Mahindra Thar, a recognized off-road SUV in India, will have its tax rate reduced to 40% from a previous range of 45-50%, dependent upon the specific variant, under the new GST rules.
Mahindra Scorpio
The Mahindra Scorpio, similar to the Thar, benefits from the removal of the cess, with its tax rate dropping 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 conclusion, a wide array of vehicles will become more affordable. The degree of savings will depend on the price, model, and specific segment. While smaller petrol cars are expected to experience more significant cost reductions, savings for large SUVs may range from 5-10% in percentage terms. However, the monetary relief, although a smaller percentage, will still be substantial due to their higher price points.
