Current GST Proposed
Item
Rate GST
Motor cars other 28% 40%
Petrol cars of engine capacity not exceeding 1200cc and of
28% 18%
length not exceeding 4000 mm
Diesel cars of engine capacity not exceeding 1500 cc and of
28% 18%
length not exceeding 4000 mm
Ambulances 28% 18%
Three wheeled vehicles 28% 18%
Hybrids with engine capacity not exceeding 1200cc and of length
28% 18%
not exceeding 4000 mm
Hybrids with engine capacity exceeding 1200cc or of length
28% 40%
exceeding 4000 mm
The shares of Indian automakers sharply surged on September 4, after the GST
Council approved a slew of reforms to the tax regime. The sharp rise in the share prices
pushed the Nifty Auto index up more than 3 percent.
The Nifty Auto index was hovering around 26,612.20, the highest level seen in nearly 11
months.
During its meeting which concluded on September 3, the Goods and Services Tax
(GST) Council reduced the GST rate on all small cars from 28 percent to 18 percent.
This includes petrol, LPG or CNG cars with engine capacity up to 1200 cc and length up
to 4000 mm, and diesel cars with engine capacity up to 1500 cc and length up to 4000
mm.
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The 10-point cut is expected to shave 5-7 percent off ex-showroom prices of popular
models such as Maruti Swift, Hyundai i10, Tata Punch and compact SUVs like the
Brezza and Venue.
While small hybrids that qualify as small cars will also benefit from the 18 percent slab,
larger petrol-electric and diesel-electric hybrids have been pushed into the top tax
bracket.
Vehicles with engines above 1200cc (for petrol) or 1500cc (for diesel), or length
exceeding four metres, will now attract 40 percent GST, up from 28 percent. The
decision runs counter to industry expectations that hybrids would receive tax incentives
as a bridge to electrification. Pure electric vehicles remain taxed at just 5 percent,
signalling the government’s preference for direct EV adoption.
However, removal of cess that was previously applicable over and above the GST, is
likely to result in marginal relief for premium and luxury vehicles as well as for hybrids.
Cess, in the range of 1 percent to 22 percent was charged above the 28 percent GST
rate for different class of vehicles. This cess will now no longer be applicable, thus some
categories of large vehicles will stand to benefit from this move, despite GST rate
moving up to 40 percent.
Premium and luxury vehicles remain heavily taxed, with cars and SUVs that fall outside
the small car definition continuing in the 40 percent bracket.
Motorcycles above 350cc will also face 40 percent GST, up from 28 percent, while two-
wheelers up to 350cc, three-wheelers and ambulances will shift to the lower 18 percent
rate.
Mahindra & Mahindra (M&M) shares gained nearly 7 percent to trade at Rs 3,505
apiece, while Eicher Motors, Tata Motors and Maruti Suzuki shares rose more than 2
percent each. TVS Motors, Hero MotoCorp and others meanwhile were up around 1
percent each.
