Major GST overhaul: Tax cut on cars, bikes soon| Know who gains what

PTC News Desk: The Centre is considering a major tax reform and working on a plan to slash Goods and Services Tax on automobiles. The proposal suggests reducing GST on small petrol and diesel cars to 18 % from current 28 % bracket. The proposal is a part of larger set of changes aimed at boosting consumption and simplifying two slab tax structure of 5 % and 18 % across all goods. The new tax bracket will replace the current four-tier system. 

Meanwhile, GST on health and life insurance is likely to get slashed to 5 % or even zero from 18 %. 

Sales of small cars have declined in recent years as more customers are opting for bigger, feature-packed SUVs. Small cars — defined as vehicles under 4 metres in length with petrol engines below 1200cc or diesel engines below 1500cc — made up about one-third of passenger vehicle sales last fiscal, down from nearly half before the pandemic.

A reduced tax rate is likely to boost leading automakers, particularly Maruti Suzuki, which has long led this category. Models like the Alto, Dzire, and Wagon-R contribute nearly half of Maruti’s sales. Hyundai and Tata Motors are also expected to benefit. Meanwhile, the government is considering restructuring GST from the existing four-tier system (5%, 12%, 18% and 28%) to just two slabs — 5% and 18%. A final decision is expected by October, when the GST Council — chaired by the Union Finance Minister and comprising representatives from all states — meets.

Both taxpayers and businesses are now awaiting clarity as the government moves toward what could be the most significant reform of GST since its rollout in 2017.