GST Rates For Auto: EVs To Face 5% Tax, Hybrid Cars 18%, Luxury Bikes 40%
Motorcycles below 350 cc engine will be taxed at 18% under the revised GST framework.
The Goods and Services Tax Council, chaired by Finance Minister Nirmala Sitharaman, announced on Wednesday a sweeping cut in tax rates on daily essentials at its 56th meeting.
The GST Council Meeting declared a new tax scheme where the GST rate on petrol and petrol hybrid, liquified petroleum gas, and compressed natural gas cars (not exceeding 1200 cc and 4000mm) will be reduced from 28% to 18%.
Electronic vehicles will continue to have 5% GST, with no changes. All automobile parts will have a uniform taxation rate at 18%.
All rates will go into effect on Sept. 22, the first day of Navratri.
Similarly diesel and diesel hybrid cars (not exceeding 1500 cc and 4000mm) will also see GST go down from 28% to 18%, according to a press release from the central government on Wednesday.
Motorcycles (350 cc and below) will also be applicable for the reduction to 18% from 28%. Those exceeding 350 cc will be charged at 40%.
Motor vehicles for the transport of goods such as buses, trucks and ambulances will also have a similar tax exemption, reducing from 28% to 18%.
"By making vehicles more affordable across all segments, this move will not only boost consumer spending but also simplify complex classification disputes that have long burdened the industry," Saurabh Agarwal, Partner and Automotive Tax Leader, EY said.
The central government also reduced the taxation slabs from four slabs to two slabs of 5% and 18% respectively.
"While this change is broadly positive, the automotive industry must now carefully reassess the financial impact of state incentives and subsidies, which are often linked to GST rates. This may necessitate a renegotiation with state governments to address potential changes in costs and clawback periods" Agarwal added.
