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Premium SUVs and sedans are currently taxed at 50 percent and it could come down to 40 percent after GST revision, leading to lower prices
We recently told you that small hatchback models are going to be cheaper by 12-13 percent in the coming days due to the revision of GST slabs. Now, it has been learnt that the big SUVs and sedans will also become more affordable with a sharp dip in price. Presently, big cars and SUVs are taxed up to 50 percent, which is the highest slab in GST. However, post the revision in GST slabs, they are going to attract 40 percent tax which will significantly bring down the prices. Though the possibility of a new cess by the GST council along with the 40 percent tax can’t be ruled out either.
During a ministerial panel meeting recently, some states put forward the demand of an additional cess over the 40 percent GST on luxury sedans and SUVs. Currently, they are charged 28 percent tax and 22 percent cess, which accounts to a total of 50 percent GST. The final decision is likely to come at the GST Council meeting next month, which will be headed by Nirmala Sitharaman, Union Minister for Finance, Government of India.
A few media reports claim that irrespective of the demands by various state governments, the Indian government is eyeing a flat 40 percent GST on big cars and SUVs without any additional cess. The sources in the govt disclosed that the cess is bound to be removed as it was merely for five years to “compensate” the state govts for “revenue loss” during the implementation of the GST.
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Though it was further extended to three more years for covering the losses of COVID-19 pandemic. If we look at the absolute gain in terms of value, big SUVs and sedans will have it higher than the small cars, which are also moved from 29 percent GST to 18 percent tax slab. This reduction in price of all the ICE-powered vehicles (petrol, diesel and hybrid) will bring them closer to EVs which are currently capped at 5 percent GST.
EVs generally come with a higher upfront price as compared to ICE vehicles and needless to state, it acts as a barrier for several prospective buyers. However, their operating cost is quite low compared to ICE vehicles. The government is also concerned on the matter of OEMs passing the benefits of lower GST directly to the customers as the anti-profiteering clause does not come into play here.
Also Read: GST Tax On Small Cars To Likely Be Reduced In India – Key Details
It is not a secret anymore that most auto companies hesitate in passing the gains directly to consumers. But this time, the govt sources say, the automobile manufacturers are likely to lower the prices of their vehicles after the new GST regime is implemented in order to boost sales volumes. The festive season of Diwali is also not too far away and this could be a once-in-a-while opportunity for the brands to cash in and increase footfall in their showrooms.
In the last few years, we have seen that the SUV segment has outnumbered the small car sales. And, with the revised GST leading to even lower prices, we could see this segment clocking even higher sales while the revival of the small car segment is also on cards.
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