GST On Large Cars: The GST Council has introduced a new vehicle tax regime that appears counterintuitive at first glance. While the levy on larger vehicles is now set at a uniform 40%, the overall price of such cars is expected to fall. The reason lies in the scrapping of the compensation cess, which previously inflated costs far more than the new flat rate will.
New Tax Rules for Cars and SUVs
The updated GST framework reduces the rate on compact cars and two-wheelers to 18%, while simultaneously imposing a higher 40% GST slab on larger cars and SUVs.
Despite sounding like a hike, this actually translates to lower costs for buyers of vehicles with petrol engines above 1,200 cc, diesel engines over 1,500 cc, and lengths exceeding four metres.
Earlier, such vehicles attracted 28% GST plus a steep compensation cess of 17–22%, resulting in a total tax burden of nearly 45–50%. With the cess now removed, buyers will face only the 40% GST, effectively reducing the price tag for several popular models in this category.
What It Means for Popular Models
Vehicles such as the Hyundai Creta 1.5 diesel and Toyota Innova HyCross, which previously carried a near-50% tax load, will now be taxed at just 40%. Luxury automakers like Mercedes-Benz, BMW, and Audi also stand to benefit, since their buyers were earlier paying close to half the vehicle’s value in taxes.
The fresh tax structure makes these cars relatively more affordable once the changes take effect later this month.
Two-Wheelers See a Mixed Impact
For motorcycles, the revisions bring a split outcome. Entry-level bikes with engines up to 350 cc, such as Royal Enfield’s Classic 350 or Honda’s CB350, will become cheaper due to the lower 18% GST.
On the other hand, premium motorcycles with higher capacities will see a jump in effective taxes. Models like the Royal Enfield 650 twins, KTM 390 Duke, and Triumph 400 will now attract the full 40% GST, compared with the earlier 31% burden, making them more expensive.
When Will New GST Come Into Effect?
The new GST structure will come into effect from September 22. While buyers of larger cars and entry-level motorcycles will welcome the relief, enthusiasts planning to buy bigger bikes may find themselves shelling out significantly more.
