GST 2.0: Small cars, 2-wheelers to get cheaper ahead of festive season

New Delhi, Sep 04: The GST rate rejig will make small cars and two-wheelers cheaper and big SUVs also are set to become affordable, as the festive season inches closer.

The GST Council has approved transformational changes to India's indirect tax structure — adopting a 5 per cent and 18 per cent tax structure — and several daily-use goods will become cheaper from September 22.

Reducing GST on small cars to 18 per cent is a big boost for the auto industry, especially with the festive season around the corner.

The GST Council has put all petrol, diesel and hybrid vehicles broadly under two tax rates — 18 per cent for vehicles under 4 metres long and 40 per cent if they are longer.

It means that small cars (less than 4 metres in length and engine capacity of under 1200 cc for petrol and 1500 cc for diesel) will attract 18 per cent GST from September 22, compared with total levies of 29-31 per cent under the current regime.

Moreover, motorcycles with engine capacity less than 350 cc also will be taxed at 18 per cent as against 28 per cent currently.

If there is an 11 per cent reduction in GST, the ex-showroom price of small cars will come down by 12-12.5 per cent, say industry experts.

For example, a car with an ex-showroom price of Rs 5 lakh will come down by Rs 62,500.

Larger cars will become slightly cheaper as they will be taxed at the special rate of 40 per cent, compared with 43-50 per cent currently, including cess.

According to experts, with auto parts also set to attract a uniform rate of 18 per cent (as against current 28 per cent), prices are likely to come down across the supply chain.

Gaurav Vangaal, associate director at S&P Global Mobility, said that brands like Maruti, Tata and Mahindra are likely to benefit the most, especially with popular small crossovers like Fronx and Punch gaining traction.