Are You Thinking Of Buying A Small Car? You might Want To Wait A Bit!
After the announcement of the GST Reform by PM Modi on Independence Day, there have been major price speculation shifts for various products. While the GST reform will directly reduce the prices of day-to-day items and make life easier for everyday consumers, there are also many things that are once-in-a-while expenses, they too will become cheaper. One of them is cars.
According to a recent HSBC report, prices of small cars in India could drop by nearly 8% if the government decides to cut the GST rate from 28% to 18%. This might sound exciting to everyone who was planning to buy a small car, or may be bring home their first cars.
Currently, passenger vehicles (PVs) bring GST revenue of between 29% to 50%, depending on the car size. That’s because a cess (extra tax) is also added on top of the standard 28% GST, especially for bigger (SUVs) or longer (Sedans) vehicles.
So, as speculated if this tax cut goes through, small cars will get much cheaper. It could be a huge relief for budget-conscious buyers or first-time car owners.
Would an 8% discount be enough to push you to the showroom? Or are you waiting to see if bigger models also get a price drop?
Either way, this possible move could make small cars more affordable and boost the auto market big time!
The report stated “This would mean for smaller cars prices may come down by 8 per cent and for bigger cars in the range of 3-5 per cent”.
Proposed Tax Structure Reform For Cars
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Reduced GST for Small Cars:
Under the proposed reforms, small cars could attract a reduced GST of 18%, leading to a price drop of around 8%. -
Special Rate for Bigger Cars:
Larger vehicles may face a special GST rate of 40%, but the cess would be completely removed, making them 3–5% cheaper. -
Alternate Flat GST Cut Scenario:
If the government opts for a flat GST cut from 28% to 18% across all car categories, prices could fall 6–8% for all types of vehicles. -
Impact on Government Revenue:
The flat GST reduction could lead to a revenue loss of $5–6 billion for the government.
Auto Industry Braces For Boost, But Concerns Linger Over EVs And Tax Structure
On Monday, the market closed on a strong surge, and the highest-gaining sector was the auto sector, giving auto companies their most profitable day. This shows how optimistic the community is towards the auto sector and the reforms expected with the new GST slabs.
So, the GST reform could bring a big boost to India’s auto sector. This will be a big win, especially for companies like Maruti Suzuki, which relies heavily on small car sales, about 68% of its total volume.
Mahindra & Mahindra is also expected to benefit, although its has shifted its focus on electric vehicles may mean a slightly smaller impact.
If the tax cuts are implemented well, it could spark a rise in demand and even create new jobs in the industry. Still, some experts are cautious. As a flat GST cut might hurt the competitiveness of EVs, and automakers may not fully pass on the savings to customers, particularly in the two-wheeler market. There’s also concern about an inverted duty structure, where taxes on vehicles are lower than those on parts, which could make things more complicated for manufacturers.
According To Report By HSBC
The report also mentioned that all two-wheeler makers would benefit from a GST reduction, with domestic players gaining relatively more. However, the government could see an impact of around USD 4-5 billion on GST collections in this scenario.
The report also discussed another, though less likely, scenario of a flat reduction in GST from 28 per cent to 18 per cent across all categories of cars. In such a case, the cess based on vehicle size would continue, and all cars would see a price benefit of about 6-8 per cent. A flat 10 per cent cut would mean the government absorbs a revenue loss of around USD 5-6 billion.
Government Revenue Implications
HSBC estimates a GST revenue loss of $4–5 billion under selective cuts, which could rise to $5–6 billion with a uniform reduction across all vehicle categories.
(With Inputs From ANI)
(From ANI)
(Disclaimer: This content written after taking inputs from ANI Wire Service and is for informational purposes only.)
Aishwarya is a journalism graduate with over three years of experience thriving in the buzzing corporate media world. She’s got a knack for decoding business news, tracking the twists and turns of the stock market, covering the masala of the entertainment world, and sometimes her stories come with just the right sprinkle of political commentary. She has worked with several organizations, interned at ZEE and gained professional skills at TV9 and News24, And now is learning and writing at NewsX, she’s no stranger to the newsroom hustle. Her storytelling style is fast-paced, creative, and perfectly tailored to connect with both the platform and its audience. Moto: Approaching every story from the reader’s point of view, backing up her insights with solid facts.
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