Small Cars, Bikes To Become Cheaper This Diwali With Impending GST Rate Reduction

India's automobile sector, which has been struggling with mediocre sales in the last few quarters, is likely to get a major boost ahead of the upcoming festive season. The Union Government, in a major policy decision, is likely to revise the GST rates levied on automobiles to make them more affordable for buyers. A major reform has been proposed, especially for cars below 1,200 cc and two-wheelers below 350 cc. Current varied rates for cars across segments are also likely to be simplified.

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Hybrid cars up to 1500 are also likely to see rate cuts

Under the new proposal, taxes on cars that run on 1200 cc or smaller engines are likely to be reduced from the current 28 per cent (plus cess) to 18 per cent. A similar reduction could also be seen in hybrid cars (up to 1500 cc). Most other passenger car segments are likely to be kept in the same category and could attract a flat tax of 40 per cent, and the current cess rates (up to 22 per cent) will determine if the prices will come down or rise. Similarly, two-wheelers that run on 350 cc engines or lower will also see a GST rate cut from the current 28 & to 18 per cent. This will help in bringing the cost down at a time of the year when Indians flock to showrooms in big numbers.

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Motorcycles below 350 cc will become more affordable with the new GST rates

Prime Minister Narendra Modi said during his Independence Day speech last week, “This Diwali, I am going to make it a double Diwali for you. This Diwali, you, fellow countrymen, are going to get a very big gift. We started the review by setting up a high-power committee and also held discussions with the states”. A group of ministers set up by the GST Council are likely to meet later this week, after which their recommendations will be forwarded to the Council.