Increased Taxation: Cars Categorized as Luxury Now Face a 40% GST Rate in the New GST 2.0
The Indian automotive market is bracing for changes as the new GST 2.0 regime takes effect from September 22. This revised tax structure, announced by the GST Council, brings about a shift in the total tax incidence for various passenger vehicles.
Under the new regime, petrol cars with engines between 1200 cc and 1500 cc, such as the Maruti Suzuki Brezza, Hyundai Creta, Maruti Suzuki XL6, Honda City, among others, will be taxed at 40%. This is a change from the current 45% tax (including 28% GST and cess) that these vehicles pay.
Diesel cars with engines above 1500 cc, including popular models like the Tata Harrier, Tata Safari, Mahindra Scorpio-N, Mahindra XUV700, Toyota Fortuner, Toyota Innova Crysta, will also be taxed at 40%. At present, these vehicles pay a total tax of 48% (including 28% GST and cess).
However, it's important to note that the GST 2.0 does not imply increased tax for all passenger vehicles. Most consumer products and services fall into the 5% and 18% slabs, while the 40% slab is reserved for luxury goods and services, often referred to as "sin products" and "sin services". The GST Council considers these larger passenger vehicles as luxury products.
Interestingly, smaller cars will see a reduction in GST rate from 28% to 18%, but this rate includes a cess, leading to a higher total tax incidence. This change affects cars like the Maruti Suzuki Alto and Hyundai Santro, among others.
The new tax structure has two main slabs: 5% and 18%, with a special slab of 40% for luxury goods and services. This shift in tax incidence could potentially influence consumer choices and purchasing decisions in the automotive market.
It's worth mentioning that the GST 2.0 will replace the current tax regime, impacting various sectors, including the automotive industry. As the rollout date approaches, manufacturers and consumers alike are closely monitoring the changes and their potential implications.
The manufacturer that developed the VinFast VF e34 41.9 kWh and the Hyundai Stargazer is VinFast for the VF e34 and Hyundai for the Stargazer. With these changes, it remains to be seen how these new tax rates will affect the pricing and demand for these vehicles in the Indian market.
In summary, the GST 2.0 regime promises to bring about significant changes in the tax structure for passenger vehicles in India. While some vehicles may see a reduction in tax, others, particularly larger petrol and diesel cars, will be taxed at a higher rate. As the implementation date approaches, the automotive industry and consumers are closely watching these developments.
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