GST 2.0 IMPLEMENTED: PM HAILS REFORM AS BOOST FOR AUTO, MSMES AND NBFCS

Prime Minister Narendra Modi on September 21 announced the implementation of GST 2.0, calling it a "major step towards simplifying taxation and strengthening India's economic growth engines." The reform, which took effect from September 22, brings sweeping changes to the automobile sector, MSMEs, and Non-Banking Finance Companies (NBFCs), with lower rates and the removal of compensation cess expected to trigger a fresh wave of consumption.

- 

Under the new structure, small cars under four metres with engines up to 1,200cc (petrol, CNG or LPG) and 1,500cc (diesel) now attract 18 per cent GST, down from the earlier 28 per cent plus cess. Sub-350cc motorcycles also fall under the 18 per cent slab. The elimination of cess, which previously ranged from 1 to 22 per cent, is expected to bring down the on-road prices of popular mass-market cars and commuter motorcycles.

Luxury cars and motorcycles above 350cc are taxed at 40 per cent under GST 2.0. Although higher than the standard slab, the rate is still below the earlier effective levy of nearly 50 per cent once cess was added. Auto components now attract 18 per cent GST, down from 28 per cent, providing relief to MSMEs in the ancillary sector.

Consumption Boost Expected