Car Price Cut: The government is contemplating significant GST reforms that may directly affect car buyers. News reports have indicated small cars and low-end bikes could become cheaper, while luxury cars and SUVs may attract a higher tax.

Tax Change on Small Cars

Reportedly, the new GST reform could be good news for small car buyers. Currently, hatchbacks, small sedans, and mini-SUVs with engines of up to 1200cc and length less than four meters incur 28 percent GST plus 1 to 3 percent cess. Under the new system, these vehicles could be moved to an 18 percent tax slab. This will help decrease prices considerably and make small cars a more sensible option for frugal buyers.

Mid-Size Car Segment

Mid-size cars can also gain from the reform. Vehicles with petrol engines over 1200cc or diesel engines over 1500cc currently fetch a 28 percent GST plus a 15 percent cess, thereby making the total tax close to 43 percent. The proposed regime may bring this down to 40 percent. While the difference is minimal, it can still have a discernible effect on pricing in this segment.

Luxury Vehicles and SUVs

Luxury vehicles and big SUVs with engine size above 1500cc and length of more than four meters will not be getting relief. These cars already have a 28 percent GST plus 20 to 22 percent cess. It has been reported that in order to keep the overall tax rate, additional levies might be imposed so that luxury and premium vehicles continue in the higher slab.

Bikes Below 350cc Might Get Relief

Two-wheeler customers will also gain. Small motorcycles up to 350cc now have a 28 percent GST imposed on them. In the proposed new plan, the rate would be reduced to 18 percent. This reduction could directly bring down the price of popular commuter motorcycles, thereby making them cheaper to purchase for young and first-time customers.

High-Capacity Bikes to be Priced Higher

However, motorcycles with engine displacement over 350cc can come under the top 40 percent slab of taxation. Currently, they are charged 28 percent GST plus an extra 3 percent cess, which amounts to 31 percent. If the proposal is cleared, high-end bikes will cost more.

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