The Indian automotive sector has welcomed the GST Council’s decision to cut tax rates on various categories of automobiles, saying it is timely and will significantly benefit first-time buyers and middle-income families.
The simplification of tax structure and lower rates for mass mobility has been called a decisive step that will boost affordability and spur consumer demand, industry officials said, while expressing hope that the government will soon notify suitable mechanisms for the utilisation of compensation cess on unsold vehicles to ensure a smooth and effective transition.
The president of the Society of India Automobile Manufacturers (SIAM), Shailesh Chandra, said the automobile industry welcomes the government's decision to reduce the GST on vehicles to 18 per cent and 40 per cent, especially in this festive season.
"This timely move is set to bring renewed cheer to consumers and inject fresh momentum into the Indian automotive sector. Making vehicles more affordable, particularly in the entry-level segment; these announcements will significantly benefit first-time buyers and middle-income families, enabling broader access to personal mobility,” he said.
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Chandra also welcomed the continuation of the GST rate of 5 per cent on electric vehicles, saying it "will help sustain the ongoing momentum towards sustainable mobility".
His sentiments were echoed by C S Vigneshwar, president of the Federation of Automobile Dealers' Associations (FADA), who said the "bold and progressive reforms" simplify the tax structure, lower rates for mass mobility, and bring consensus across all states.
"This is a decisive step that will boost affordability, spur demand, and make India's mobility ecosystem stronger and more inclusive," he said, adding, "as the country heads into the peak festive season, glitch-free and implementation will be the key to ensuring that the benefits seamlessly reach customers".
Under the newly-approved tax structure, which is effective from September 22, petrol, LPG and CNG vehicles of less than 1,200 cc and not more than 4,000 mm length and diesel vehicles of up to 1,500 cc and 4,000 mm length would move to the 18 per cent rate from the current 28 per cent rate with an added 1 per cent compensation cess and 28 per cent GST with an additional 3 per cent compensation cess respectively.
Motorcycles up to 350 cc would be taxed at a lower GST of 18 per cent against 28 per cent earlier. However, all automobiles above 1,200 cc and longer than 4,000 mm as well as motorcycles above 350 cc and racing cars will be charged with a 40 per cent levy.
Chairman of TVS Motor Company, Sudarshan Venu, said the GST rate cut “will significantly boost consumption across segments of the society”.
"For our industry especially, it is a welcome move as it will help two-wheelers become more accessible and also help those looking to upgrade," he added.
Industry veterans did however point out the need for the government to clarify its stance on the levy and treatment of cess balances.
"One area that may need earliest clarification is about levy and treatment of cess balances currently lying in dealers' books, so that there is no ambiguity during transition,” Vigneshwar said.
Chandra also noted that the auto industry is "confident that the government will also soon notify suitable mechanisms for the utilisation of compensation cess on unsold vehicles, ensuring a smooth and effective transition".
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