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With the introduction of a new GST regime with differentiated tax rates, the Indian government plans to provide significant relief for future buyers of cars and two-wheelers.

Read on to find out all the details!

Government Plans New GST Regime to Ease Costs for Car and Two-Wheeler Buyers

Currently, small cars are subject to 28% GST plus a 1-3 percent small cess.

Currently, SUVs are subject to a 50% tax, which includes GST and cess.

In India, the government intends to lower the GST rates on automobiles and motorcycles.

The new GST plan was alluded to by Prime Minister Narendra Modi in his Independence Day speech.

The government plans to reduce the tax rates on air conditioners and building supplies in addition to automobiles, SUVs, and two-wheelers.

According to sources, in order to prevent confusion, the current GST definition of SUVs may be eliminated.

New GST Regime May Introduce Two-Tier Tax Slabs: Merit and Standard

Merit and Standard tax slabs will be introduced under the new GST regime, according to reports.

The Standard category will have an 18% GST rate, while the Merit category will include goods and products subject to a 5% tax.

The government hopes to implement the new regime by Diwali this year, though specifics have not yet been made public.

The entire Indian automobile industry is anticipated to gain from the action.

Lower manufacturing and component costs could result from lower GST rates, which could increase output.

Small cars under ₹10 lakh and entry-level motorcycles are probably the immediate beneficiaries.

The current 5% GST rate is likely to be maintained for electric vehicles.

However, the GST rates for luxury cars might not change.

In September 2024, the Union Government launched the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme to incentivize the purchase of electric vehicles (EVs) in India. Under this scheme, a subsidy of ₹10,000 is provided for each electric two-wheeler and ₹50,000 for electric three-wheelers until March 2025. The scheme aims to encourage EV adoption and expand market share for electric two- and three-wheelers.