Govt mulls lowering GST on small cars from 28% to 18%

Cars with higher engine capacity might come under the new special rate of 40%.

The central government has suggested lowering GST on small cars as part of the biggest tax overhaul since 2017.

According to media reports, the government is planning to reduce GST on small petrol and diesel cars from the current 28% to 18%. The move is expected to boost small car sales at a time when India and the US are locked in a trade war.

Small cars are defined as those having engine capacity below 1,200cc for petrol vehicles and 1,500cc for diesel models and not exceeding 4 meters in length.

Small cars made up a third of the 4.3 million passenger vehicles sold in India last fiscal year. However, sales have slowed with more customers switching to bigger SUVs.

Meanwhile, cars with higher engine capacity might come under the new special rate of 40%. Currently, these vehicles attract 28% GST and an additional 22% tax.

Source: Reuters

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