Price drop awaits
Small car prices may decrease by up to 10% if the applicable tax slab is reduced from 28% to 18%.
As part of the wider reforms to boost economic growth, the Centre has proposed moving from four tax slabs to a simplified two-rate system: 5% for essential items and 18% for most other goods. Luxury and sin products are likely to face a steeper levy of around 40%.
At present, vehicles are taxed under multiple slabs combining GST and cess. Small cars are taxed at 28%, whereas large cars (above 4 meters in length and 1200cc in engine size) are taxed (including cess) in the range of 43-50%.
As per reports, the government is weighing a flat 18% levy on smaller cars and two-wheelers whose engine size is below 350cc. Luxury cars and sports utility vehicles are expected to fall under the higher 40% bracket.
Industry experts believe that the rate cut will provide a major boost to the small car segment, as prices in this category have increased by 50% to 80% over the past six years, making them unaffordable for many buyers.