New Delhi: The central government is planning a big festive gift for car and bike buyers this Diwali. Reports suggest that GST (Goods and Services Tax) on small cars with engines under 1200cc (i.e., 1.2L) and two-wheelers (including bikes and scooters) under 350cc could be reduced ahead of Diwali. At present, both small cars and bikes in these categories attract 28% GST. Bigger cars and higher capacity bikes pay an additional 3% cess.Â
The proposal is to bring GST down from 28% to 18%. If that happens, prices of small cars and two-wheelers will drop by nearly 10%, making them accessible to a wider customer base. Such a decision will benefit both buyers and OEMs. Buyers can get the vehicle at a more affordable price, while OEMs will have a chance to boost the declining sales of smaller cars.
Let’s take the Maruti WagonR, for example. It measures 3,655mm in length and comes with a 998cc petrol engine that makes 89bhp and 113Nm. Prices for the hatchback range from Rs 6.30 lakh to Rs 8.52 lakh. The model, currently, attracts a GST of 28% but with the proposed revision, it will drop by 10%, and buyers could save around Rs 20,000 to Rs 25,000 on entry-level models.
Since GST is included in ex-showroom prices, any reduction will directly lower both ex-showroom and on-road prices of both four-wheelers and two-wheelers. That makes this move a huge relief for budget-conscious customers and could give a fresh push to sales in the entry-level car and two-wheeler market.
However, luxury cars won’t see such relief. They are expected to fall under a higher 40% tax slab. Currently, EVs enjoy just 5% GST, while hydrogen fuel-cell vehicles attract 12%, with no extra cess.Â
In the bike segment, models under 350cc have a 28% GST with no cess, but anything above 350cc falls under the 31% bracket. If approved, this proposed tax cut could be a game-changer for the auto industry, making small cars and bikes more affordable.