A major development is unfolding within the Indian automotive sector concerning potential modifications to the Goods and Services Tax (GST) framework. The government is considering measures to streamline the GST structure and potentially lower tax rates. This could have a positive effect on the prices of smaller and mid-size cars. This piece examines the estimated price changes for models such as the Creta, Venue, Exter, and i20 if GST rates are adjusted. Currently, small cars are taxed at 28% GST plus a 1% cess, resulting in a tax burden of about 29%. If this is reduced to 18%, consumers could directly benefit from a 10% reduction in taxes, which would result in lower car prices. Consider a car with an ex-factory price of ₹5 lakh. Its price might reach ₹6.45 lakh under the present tax structure. Under the proposed system, the same car might cost approximately ₹5.90 lakh, translating to savings of approximately ₹55,000 for the consumer. If GST is decreased from 28% to 18%, expect to see significant price reductions for these vehicles. The Hyundai Exter, with an initial price of ₹5,99,900, currently has a tax component of ₹1,73,971. Upon a GST reduction, approximately ₹59,990 in savings could be realized. The Hyundai i20, priced at ₹7,50,900, might experience a price reduction of about ₹75,000. The Hyundai Venue, currently priced at ₹7,94,100, could offer savings of roughly ₹79,400. The Hyundai Creta, a highly sought-after SUV, has a starting price of ₹11,10,900. A GST cut could lead to consumer savings of approximately ₹1,11,000. The primary beneficiaries of these adjustments will be consumers in the middle-class looking to purchase new cars within their budget. Hatchbacks and compact SUVs may see price reductions ranging from ₹60,000 to ₹80,000.
