GST 2.0 Brings Huge Price Cuts On Cars

The new GST framework has been largely received positively by motorists across vehicle categories, however, the increase of GST on motorcycles larger than 350cc left a bitter taste for motorcycle enthusiasts in the country

- By Kanaad Chatterjee

India’s auto sector has been given a decisive jolt of relief under the new GST 2. 0 framework, effective September 22. The reform simplifies the tax structure, trims rates across segments, and crucially abolishes the compensation cess—a longstanding burden on bigger cars and SUVs.

Small petrol cars ( ≤ 1,200 cc) or diesel cars ( ≤ 1,500 cc) under 4 metres length will now attract 18 per cent GST instead of the earlier 28 per cent plus compensation cess. Larger and luxury cars will now be taxed at 40 per cent, replacing the former -45-50 per cent effective tax burden. In the two-wheeler segment, vehicles with engine capacity ≤ 350 cc will now draw 18 per cent GST (down from 28 per cent ), while those above 350 cc will face 40 per cent , up from the older 31 per cent. Electric vehicles continue to enjoy a concessional 5 per cent rate. Auto parts and components are mostly in the 18 per cent slab. The cess has been scrapped in most of these categories.

Manufacturers wasted no time in passing on the benefits. In the mass-market segment, Maruti’s Fronx is cheaper by Rs 1.1 lakh, while Honda's Amaze has shed close to Rs 95,500. Luxury buyers too are seeing unprecedented cuts, with Lexus slashing up to Rs 20.8 lakh on the LX 500d. Mercedes-Benz, BMW, Audi, and Land Rover have also announced price reductions across their lineups. In the two-wheeler category, exact model-wise cuts are still being rolled out, but scooters such as the Honda Activa and entry-level motorcycles are expected to be cheaper by several thousand rupees, while larger bikes from Royal Enfield, KTM, and Harley-Davidson may see price hikes.