Potential GST Cut Could Slash Small Car Prices in India by 8%

A potential GST reduction could decrease small car prices in India by 8%, according to an HSBC report. The proposal suggests lowering GST from 28% to 18% for small cars and introducing a 40% rate for larger vehicles, potentially reducing bigger car prices by 3-5%.

In a promising move for small car buyers, a recent HSBC report indicates that the Indian government may consider slashing the Goods and Services Tax (GST) rate on small cars from the current 28% to an appealing 18%. Such a decision could make small cars approximately 8% cheaper.

The current tax structure places passenger vehicles under a 29% to 50% GST slab, inclusive of a cess depending on vehicle dimensions. HSBC suggests that while small cars could enjoy a reduced tax, larger cars might see a special rate of 40%, eliminating the additional cess and making them 3-5% cheaper.

Besides, the report underlines a potential USD 4-5 billion impact on government GST revenues, should all two-wheeler manufacturers benefit considerably from such a reduction. It also explores an alternate albeit less likely scenario where a flat tax reduction to 18% across all car categories could result in a 6-8% price dip, potentially costing the government USD 5-6 billion.

(With inputs from agencies.)