KEY HIGHLIGHTS
- The new GST rates are likely going to applicable from late September onwards.
- As per reports, only two main tax slabs have been proposed.
- Vehicles for physically-disabled people will be exempted.
There has been quite a lot of ruckus around the proposed new GST rates, which are said to reduce the number taxes buyers are required to pay under the current format. However, these tax slabs are not going to be uniform, which will certainly impact every segment in one way or the other. This move will also certainly impact the dreams of many buyers, who wish to own a certain type of car or motorcycle.
Before we dive into the details and dig deep around this matter, make sure to join the 91wheels WhatsApp Community to keep up with the latest news and updates from the automotive space.
Also read: Vintage Vehicle Registration Now Open In Uttar Pradesh!
New GST Rates - How Every Segment Will Be Impacted
The proposed new GST rates, which are likely going to be implemented later this month, are as follows:
Ϡ Small Petrol Cars (less than 1200cc, 4m): 28% GST + 1% Cess = 29%. Expected drop to 18% after GST overhaul.
Ϡ Small Diesel Cars (less than 1500cc, 4m): 28% GST + 3% Cess = 31%. Expected drop to 18%.
Ϡ Mid-sized Cars (1200cc petrol or 1500cc diesel): 28% GST + 15% Cess = 43%. Planned reduction to 18% for most models.
Ϡ Luxury Cars (1500cc or more): 28% GST + 20% Cess = 48%. could move to a new 40% special bracket.
Ϡ SUVs (1500cc, 4m): 28% GST + 22% Cess = up to 50%. Proposed 40% rate.
Ϡ Vehicles for Physically Disabled Persons: GST exempt.
Ϡ Bikes lesser than 350cc: 28% GST. Expected to drop to 18% under the new regime.
Ϡ Bikes bigger than 350cc: 28% GST + 3% Cess = 31%. Likely to be moved to a special 40% slab.
What this essentially means, is that the Government has proposed to lower the GST rates on sub-4m petrol and diesel cars from 28 percent to 18 percent. This will include small petrol cars with an engine capacity lower than 1200cc, and small diesel cars with an engine capacity lower than 1500cc. The cess rates, which currently stand at 1% for small petrol cars and 3% small diesel cars will not be levied anymore under the new GST regime.
The mid-size category, with capacities greater than 1200cc (petrol) and 1500cc (diesel), is also believed to get a planned reduction down to 18% for most models. Meanwhile, SUVs and luxury cars, which measure more than 4m in length and come with engines greater than 1500cc have been proposed to fall under a new 40 percent slab. However, the cess rate, for the SUV category in particular is likely to be kept at 'upto 50 percent.'
The EV category is where things get rather interesting. While EVs are currently taxed at 5%,, it is understood that EVs in the Rs 20 lakh to Rs 40 lakh price bracket may be taxed at 18% under the new regime. It is also understood that a panel has proposed hiking the tax slab to 28% for EVs priced above Rs 40 lakh. Remember why we said 'interesting?'
As of now, it seems like the new regime is likely going to benefit the sub-4m category. More specifically the compact SUV segment, which has already been booming. However, there could also be a case here for the small car segment, which has been on a decline for a while. The segment has shrunk over the last few years as well. A few months ago, we even asked a certain question about whether the small car is going to disappear or not. We shall link it right below just in case.
Also read: Is The Small Car Truly Disappearing From The Indian Market?
Coming to two-wheelers, this is where things have gotten rather noisy in the last few days. Two-wheelers below 350cc, currently taxed at 28 percent, are expected to fall to an 18 percent slab. However, two-wheelers above 350cc are believed to move to a new 40 percent slab.
This is interesting for many reasons. The lower slab will certainly make scooters and motorcycles under 350cc more affordable. However, the higher proposed tax slab for motorcycles above 350cc will make them more expensive then they already are. Think about an average consumer who dreams of buying a bigger motorcycle someday. Perhaps something like a KTM 390 Adventure, or a Triumph Speed 400, or any one of the Royal Enfield 650cc motorcycles. Now imagine paying an extra amount over the current on-road price due to the new proposed tax slab.
People such as Siddhartha Lal, CEO, Royal Enfield, and Ajinkya Firodia, Vice President, Kinetic India, have raised this issue, and have called for a 'middle ground', or at least a uniform 18% GST rate across all platforms. Rajiv Bajaj, Managing Director, Bajaj Auto has welcomed the Govt's decision to cut down to an 18 percent slab, but he also says that even that number is still rather high.
Verdict
In terms of cars, it seems like there is a possibility for small cars to become successful once again, considering the tax slabs that have been pushing their prices up will be gone. However, the decision to raise tax slabs on EVs is baffling, considering the push for EV adoption in India. Similarly, in two-wheelers, there certainly is a need for a common ground on tax slabs, for the reasons that have been explained above.
