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Alto To Cost Under Rs 4 Lakh! All About Upcoming GST Reforms Here
India's automobile sector could be in for a major shake-up, as the government prepares to restructure GST rates under sweeping tax reforms. Automobiles currently attract 28% GST-the highest slab in the regime-along with a compensation cess of 1% to 22% depending on engine capacity and size. This often pushes the total tax incidence on cars anywhere between 29% (small petrol cars) to a hefty 50% (SUVs).
Electric vehicles enjoy a far lower 5% GST, but for mainstream buyers, high taxes have long been a sore point.
According to a PTI report, the Centre is working on a two-tier GST structure of 5% and 18%, with a 40% slab reserved for luxury and select items. If approved, automobiles would move to the 18% bracket, replacing the current 28% structure. Crucially, this would also end disputes over classification based on engine capacity and vehicle length, simplifying the tax structure.
For consumers, this means cars-especially small cars that drive the mass market-could become more affordable. Automakers too are hopeful this change will boost demand and consumption, aligning with the government's larger economic revival plan.
The proposal will be taken up by the Group of Ministers (GoM) on August 21, followed by a GST Council meeting next month for the final call.
What This Means for Buyers
If the GST rate on automobiles drops from 28% to 18%, the above cars could see price corrections in the range of Rs 30,000 to Rs 80,000, depending on the model and variant. That kind of cut could make entry-level cars far more accessible, giving a much-needed push to India's small car segment, which has been struggling in recent years. As for budget-conscious buyers, the timing couldn't be better.
Cars Under Rs 4 Lakh!
Under the new GST reform, models such as Maruti Suzuki Alto K10, and Maruti Suzuki S-Presso could be priced under Rs 4 lakh, making these models a lot more accessible to people looking forward to buying their first car.
DriveSpark Thinks
With the drop in GST rates, we expect the entry-level hatchback sales to improve significantly. Out of these entry-level models, we expect more desirable hatchbacks such as Maruti Suzuki Celerio and Tata Tiago sales to have a significant positive impact.
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