The Indian automobile industry appears to be exhaling with relief as a result of GST 2.0. Your ideal car is now considerably more affordable thanks to the GST Council's reductions in tax rates across all categories.
No More Cess: Car Prices Set to Drop After GST Reform
One of the key highlights of the recent GST reforms is the removal of the compensation cess on automobiles. Until now, cars attracted a compensation cess ranging from 1% to 22%, depending on their category or drivetrain, pushing the effective tax burden to anywhere between 29% and 50%.
With the cess now abolished, the overall tax incidence on cars has dropped significantly. Industry experts note that this change will make vehicles across categories more affordable for buyers.
A comparison of the earlier and revised tax structures shows a considerable reduction in prices, offering relief to consumers and a potential boost to automobile sales.
The removal of compensation cess under the revised GST regime is set to benefit a wide range of small cars and compact SUVs. Popular models such as the Maruti Suzuki Alto, Renault Kwid, Maruti Suzuki Baleno, and Hyundai i20 will see reduced tax rates, making them more affordable for buyers.
Similarly, sub-4-metre SUVs with petrol engines smaller than 1,200cc — including the Hyundai Venue, Kia Sonet, Kia Syros, Tata Nexon, and Tata Punch — will also enjoy lower effective tax rates.
However, not all models will see the same level of relief. For instance, the Maruti Suzuki Brezza, equipped with a 1,500cc engine, previously attracted a compensation cess of 17%, taking its effective tax rate to 45%. Under the new GST structure, this has been reduced to 40%, offering only marginal relief to buyers.