GST revision on cars and bikes: 3 tax slabs explained

The GST revision has been a pivotal move to boost demand in the automobile sector and after the GST council meeting we have a new 40 per cent slab on luxury and sin goods.

• 18 per cent slab for petrol, hybrid, LNG and CNG cars
• 5 per cent slab for electric vehicles, tractors, tanks and armoured vehicles
• 40 per cent slab for luxury cars

In an attempt to boost the automobile sector the government has revised the Goods and Services Tax (GST) on auto parts and vehicles. The Compensation Cess has been removed and we have a new 40 per cent slab for vehicles that cost a hefty amount of money. The removal of cess has simplified the taxation, prior to the revision the tax calculation included the Compensation Cess  as well. The 12 per cent and 28 per cent slabs have been removed, the 5 per cent and 18 per cent slabs are still intact. This has made vehicles affordable in multiple categories.

18 % Slab
This slab includes petrol, hybrid, CNG and LNG cars, motorcycles with engine capacity of 350cc, three-wheelers, tyres, auto parts excluding tractors, tractors with engine capacity over 1,800cc, along with ambulances and buses. This slab also includes cars with up to 1,200cc engine capacity and under four metres in length, and for diesel engines the capping limit is set at upt0 1,500cc and under four metres in length.

5% Slab
This slab consists of electric vehicles, tractor tyres and tubes, bicycles and other cycles, tanks and armoured vehicles, tractors up to an engine capacity of 1,800cc, and tractor components.

40% Slab
This includes motorcycles with an engine capacity over 350cc, petrol cars with an engine capacity over 1,200cc, diesel cars with an engine capacity over 1,500cc, or overall length exceeding four metres. It also includes premium and luxury cars, racing cars and station wagons.

Due to the revised GST Slabs, small car manufacturers like Tata Motors, Hyundai and Maruti Suzuki ought to benefit from the new slabs. And similarly in the two-wheeler space, Hero Motocorp, TVS, and Bajaj Auto is expected to benefit. Tractor manufacturers like Mahindra & Mahindra, Escorts Kubota along with tyre manufacturers like MRF, Ceat, Apollo Tyres is expected to benefit with the new revision.