GST Reduced On Small Cars & Small Capacity Bikes, Large Capacity Bikes To Get More Expensive
The government has reduced the GST on petrol, diesel, and hybrid cars from 28% GST to only 18%. This reduction applies to cars up to 4000mm long with 1200cc petrol or 1500cc diesel engines. It is great news for budget-conscious buyers aspiring to buy small cars as a result of the revision.
Midsize & Large Cars GST Rates
The revised tax regime also benefits midsize and large cars. Earlier, they attracted 28% GST plus cess, totalling 43 to 50%. Now, the government will uniformly tax these cars at 40% GST, without the component of cess.
Motorcycles GST Rates
Motorcycles with engine capacities up to 350cc are also included in the tax reduction. Their rate has dropped from 28% to 18%. This revision makes commuter motorcycles more accessible for the mass market.
Under the revised structure, large-capacity motorcycles face a different scenario. Now, bikes above 350cc will attract 40% GST. This increase aligns them with “sin goods” like alcohol and tobacco, making them costlier than before.
EV’s GST Rates
Despite speculation of a hike, the government has retained favourable rates for electric vehicles. EVs continue to be taxed at just 5%. The stability of these rates aims to encourage adoption, particularly in the luxury segment, where penetration already stands around 8%.
Outlook
The automobile industry is expected to benefit from these reforms. Small cars and motorcycles will stimulate consumer demand due to lower taxes. It remains to be seen whether this historic tax relief helps to accelerate growth in the automotive sector.
