The 56th Meeting of Goods and Services Tax was held on 3rd September in New Delhi, and was chaired by Union Finance Minister Nirmala Sitharaman and went on for the next two days to discuss on the next phase of reforms, and simplification of tax rates. The council has done away with the 12% and 28% slabs, and further streamlined to 5%, and 18% while adding a new 40% for sin and luxury goods. They (the Council) have also removed the compensation cess. These revised rates will be effective from September 22, and is considered a welcome move to attract new buys this upcoming festive season.
Effect on the auto sector
Under the new slab, motorcycles and scooters with an engine capacity of upto 350 cc will be taxed at 18% from the previous 28%. This new policy also makes way for small and mid size cars as they will also be taxed in the 18% bracket while luxury goods, and cars will fall under 40% tax. Now for SUV’s, engines exceeding 1500cc and longer than 4metres, the tax climbs to nearly 50% (28% GST + 22% cess). Imported armoured vehicles, particularly for VVIPs and those imported by the President’s Secretariat, are exempt from GST.
According to Saurabh Agarwal, Partner & Automotive Tax Leader, EY India, “The rationalisation of GST rates on automotive vehicles and parts is a truly welcome and significant development. 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.”
The Council also decided to retain the concessional 5% rate on electric vehicles which is seen as an encouragement for India’s clean transport, and this is applicable to all EV’S whether luxury or mass-produced. This has also encouraged the automobile component sector which now also comes under 18%. This means that domestic EV’s like Tata Harrier EV, Mahindra BE 6, and imported models like Tesla, BMW, BYD will all come under the same bracket.
