Big Diwali Gift from Modi Govt: GST Cuts to Make Cars and Bikes Cheaper Soon!
Mumbai (The Uttam Hindu): In a major reform move ahead of Diwali, the Central Government is planning to rationalize the Goods and Services Tax (GST) rates, with a proposal to reduce taxes on passenger vehicles (PVs) and two-wheelers, making them more affordable for the middle class.
According to Finance Ministry sources, the government has proposed a simplified two-slab GST structure of 5% and 18%, replacing the current four-tier system. The proposal has been sent to the GST Council, which is expected to take a final call in its September meeting.
Currently, passenger vehicles attract 28% GST, along with a compensation cess ranging from 1% to 22% depending on engine capacity, length, and body type, pushing the total tax burden to as high as 50%. Two-wheelers also attract 28% GST, with an additional 3% cess on engines above 350cc. Electric vehicles, however, continue to enjoy just 5% GST with no cess.
The new structure could remove the 12% and 28% brackets, providing relief to small car and two-wheeler buyers. Luxury cars, however, may still face up to 40% tax.
Prime Minister Narendra Modi said, “We are bringing next-generation GST reforms as a festive gift for citizens. The poor and middle class will see a sharp reduction in essential taxes, MSMEs will get a big boost, and everyday goods will become cheaper. This Diwali, the people of India will get a double benefit.”
Industry bodies and automakers like Maruti Suzuki India and Hero MotoCorp have been strongly lobbying for a reduction in GST rates, especially from 28% to 18%, to revive small car sales hit by rising costs and regulatory changes. The market responded positively, with the Nifty Auto Index jumping 4.52% by 1:34 PM on hopes of tax relief. Experts believe the move will boost affordability, sales, and manufacturing growth, giving the automobile sector a much-needed revival.