How Will GST 2.0 Make Small Cars and 2-Wheelers Cheaper?
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Synopsis
As the festive season approaches, the recent GST overhaul promises significant price reductions for small cars and two-wheelers in India. With changes in tax structures, consumers can expect more affordable options ahead of the celebrations. Discover how this transformation is reshaping the automotive landscape.
Key Takeaways
- GST on small cars reduced to 18% from 29-31%
- Price drops expected for two-wheelers as well
- Uniform rate for auto parts at 18%
- Benefits for leading brands like Maruti and Tata
- Effective from September 22, 2023
New Delhi, Sep 4 (NationPress) The recent GST overhaul will lead to lower prices for small cars and two-wheelers, while larger SUVs are also becoming more affordable as we approach the festive season.
The GST Council has sanctioned significant reforms to India's indirect taxation system — implementing a tax framework of 5 percent and 18 percent — which will reduce costs on various essential items starting September 22.
The adjustment of the GST on small cars to 18 percent is a significant enhancement for the automotive sector, especially with the festive period nearing.
The GST Council has categorized all petrol, diesel, and hybrid vehicles under two tax brackets — 18 percent for vehicles under 4 meters in length and 40 percent for those exceeding that length.
This means that small cars (measuring less than 4 meters and with petrol engine capacities below 1200 cc and diesel below 1500 cc) will now incur an 18 percent GST from September 22, down from total taxes of 29-31 percent under the previous system.
Additionally, motorcycles with engine sizes below 350 cc will also be taxed at 18 percent, a drop from the current 28 percent.
Experts estimate that an 11 percent reduction in GST could lower the ex-showroom costs of small cars by around 12-12.5 percent.
For instance, a car priced at Rs 5 lakh could see a price drop of Rs 62,500.
While larger vehicles will see a slight decrease, they will now be taxed at a special rate of 40 percent, down from the current 43-50 percent, including cess.
Experts also suggest that with auto components set to be taxed uniformly at 18 percent (compared to the current 28 percent), prices throughout the supply chain may decrease.
Gaurav Vangaal, associate director at S&P Global Mobility, indicated that manufacturers like Maruti, Tata, and Mahindra could benefit most, especially with popular compact crossovers like Fronx and Punch gaining popularity.
Point of View
The recent GST adjustments reflect a proactive approach by the government to stimulate the automotive sector ahead of the festive season. This move not only makes vehicles more affordable but also supports the broader economy by encouraging consumer spending during a critical time.
NationPress
04/09/2025
Frequently Asked Questions
What is the new GST rate for small cars?
The new GST rate for small cars is set at 18 percent, down from the previous total levies of 29-31 percent.
When will the new GST rates take effect?
The new GST rates will take effect from September 22.
How much can consumers expect to save on small cars?
Consumers can expect price reductions of approximately 12-12.5 percent on small cars with the revised GST.
Will larger vehicles also see a reduction in taxes?
Yes, larger vehicles will be taxed at 40 percent, a slight reduction from the current rates of 43-50 percent.
What impact will this have on the automotive industry?
This change is anticipated to boost the automotive industry significantly, encouraging sales during the festive season.
