The government’s recent decision to revise the GST slabs will lead to price adjustments in the automobile market. Petrol vehicles with engine capacities exceeding 1200cc and diesel vehicles with engine capacities exceeding 1500cc will now be subject to a 40% tax rate, provided their length does not exceed 4 meters. Consequently, cars from popular brands like Kia, Creta, Hyundai, and Nexon will become more affordable.
The GST Council’s implementation of GST 2.0, following Prime Minister Narendra Modi’s announcement, has brought significant changes to the auto sector. This new tax structure provides relief to buyers of smaller cars and two-wheelers, as well as those interested in luxury vehicles and large SUVs.
Cars up to 4 meters in length and equipped with engines up to 1200cc (petrol) or 1500cc (diesel) will now be taxed at 18%, a reduction from the previous 29-31% rate. This will result in substantial savings for buyers of models like the Maruti Alto, Tata Punch, and Hyundai Grand i10.
Larger vehicles, specifically those exceeding 4 meters in length with petrol engines above 1200cc or diesel engines above 1500cc, are categorized as luxury goods and will attract a 40% GST. This includes models such as the Creta, Kia Seltos, Hyundai Alcazar, Tata Harrier, XUV700 and Innova Hycross.
The government has also incorporated ground clearance as a criterion for tax calculations. Vehicles exceeding 4 meters in length, with engines exceeding 1500cc and a ground clearance of 170mm or more, will also be subject to a 40% tax.
The tax cuts on small cars will directly benefit consumers. For instance, a car priced at ₹5 lakh could see a price reduction of approximately ₹62,500. This change is particularly beneficial for entry-level buyers who have been affected by increasing prices. Additionally, two-wheelers with engine capacities up to 350cc will have their tax reduced from 28% to 18%. This will make models like the Hero Splendor, Honda Activa, and TVS Jupiter more economical.