GST Restructuring: Small Cars to Benefit, Luxury Vehicles Face Potential Price Hikes

Reports indicate that small cars may receive significant relief under the proposed Goods and Services Tax (GST) changes. The plan suggests placing them in the 18 percent tax slab. Currently, small cars are subject to 28 percent GST plus a 1% cess, resulting in a high tax burden. The new system is expected to reduce this burden, potentially making these cars more affordable. Small vehicles are defined as those with a length of up to 4 meters and an engine capacity of less than 1200cc. Meanwhile, the government intends to impose higher taxes on large cars and SUVs, with a special tax of 40 percent. Currently, these vehicles face taxes (GST + cess) ranging from 43-50 percent. However, the government is preparing to set a special tax slab of 40 percent. Currently, the total tax (GST + cess) on luxury vehicles ranges from 43% to 50%. On the other hand, Electric Vehicles (EVs) will not be subjected to any additional burden as before. That is, only 5% GST will still be applicable on EVs. This decision aligns with the government’s policy to promote electric mobility.