The Indian government aims to slash GST on entry-level cars from 28 percent to 18 percent, Reuters reported. A maximum 5 percent GST cap on insurance premiums has also been proposed by the authorities. Likely to be effective by Diwali, it would be the largest tax overhaul in almost a decade for the automobile sector.
- GST on cars to be restructured to settle disputes on engine size, vehicle length: PTI
- A separate, higher tax slab will apply to cars with engines over 1200cc
- Small cars made up one-third of 4.3 million cars sold in last FY
This comes after Prime Minister Narendra Modi spoke of GST reforms during his Independence Day speech. “We are bringing the next generation of GST reforms…Taxes needed by the common man will be reduced substantially,” he added, though a specific sector wasn’t mentioned.
Maruti, Tata, Hyundai to benefit the most
Mass-market carmakers like Maruti Suzuki, Tata Motors and Hyundai Motor India derive over 60 percent of their sales from cars with engines below 1200cc. In addition to these, some reports suggest that the proposed GST cut may also cover sub-4-metre cars with diesel engines up to 1500cc. Increased standard safety equipment and emission compliance have also inflated car prices in recent years. For instance, the cheapest car in India – the Maruti Alto K10 – is priced from Rs 4.23 lakh onwards.
Maruti chairman R C Bhargava had earlier flagged sluggish sales growth – stagnated at just 4.4 percent over the last 6 years – and called for government policies that can facilitate the growth of the car industry. “The growth rate of the car industry has become a matter of considerable concern,” he had stated. In FY25, domestic passenger vehicle sales rose only 2 percent year-on-year, and for the current year, the industry expects slow growth of about 1-4 percent.
MARUTI ALTO K10 PRICE IS EX-SHOWROOM, DELHI.
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