GST rate cut
According to sources, the Center considers imposing a flat 18% tax on automobiles and two-wheelers with engines smaller than 350 cc. Sports utility vehicles and luxury automobiles are anticipated to be in the higher 40% range.
As Prime Minister Narendra Modi pledged on India’s 79th Independence Day, “next generation GST reforms” might make bikes and compact and luxury cars more affordable in India. A survey by HSBC, which was reported by news agency ANI, suggests that while larger cars may experience price reductions of three to five percent, smaller cars may see price reductions of around eight percent.
The center has suggested switching from four tax slabs to a more straightforward two-rate system, with 5% going to necessities and 18% to the majority of other goods, as part of broader reforms aimed at accelerating economic growth. A higher tax of about 40% is probably in store for luxury and sinful goods.
“Entry-level car prices can drop by 8–10% if the GST is reduced to 18%. Currently, autos are in the 28% GST bracket. The main winners are probably going to be companies with a robust entry-level portfolio, such as Maruti, Hyundai, and Tata Motors,” Sunny Agrawal, Head of Fundamental Research at SBI Securities, told TNIE.
According to another news agency, PTI, the Finance Ministry had suggested to the Group of Ministers of the GST Council that the 28% and 12% GST slabs be eliminated.
90% of products and services that fall under the 28% slab would therefore be moved to the lower 18% rate. Therefore, it is anticipated that these goods will become more affordable following the revision of the GST structure. Additionally, the 28% rule applies on the majority of automobiles in India.
Customers are unlikely to purchase cars before this step in anticipation of the rate reductions, according to analysts at Motilal Oswal Financial Services, who predict a 7% decrease in car costs if these rates are not adopted shortly.
The local trading business stated, “This action is likely to put OEMs in a spot in the interim, at a time when OEMs were aiming to shift dealer stock in anticipation of a demand resurgence in the holiday.”
The purchasers have entered a state of waiting and observing.” A top executive of a major automaker told TNIE, “We are hoping that the tax cut takes effect before the holiday season because any delay could result in reduced sales and more unsold inventory for us.
