Key Points

Even as the festive season is approaching, customers are delaying car purchases in expectation of a GST rate cut, and these delays could turn festive sales into a “whitewash” period, NDTV Profit reported, citing a letter sent by the industry body to the Finance, Commerce, and Heavy Industries Ministries.

FADA has requested to prepone the GST Council meeting, which is currently set for September 3 and 4.

The council will consider the proposal from the Finance Ministry for two GST rates of 5 per cent and 18 per cent across all goods, which will replace the existing four slab structure.

The Association said that automobile dealerships may experience financial stress from increased inventory levels. FADA called for the proposed low GST rates on non-premium cars to be implemented before Diwali, as pent-up demand is expected to materialise during the festive period following the new GST rollout.

The body also requested clarification on how the accumulated cess will be utilised after the cess removal, the report stated.

The GST council is expected to introduce new tax slabs around September 22 to enhance India's festive demand, government sources informed NDTV Profit. Notifications are expected to start rolling out five to seven days after the GST Council's decision.

Currently, all passenger vehicles are subject to a GST of 28 per cent plus a compensation cess of 1 per cent to 22 per cent based on engine capacity, length, and body type, raising the total tax payable to as much as 50 per cent. Electric cars are taxed at 5 per cent with no compensation cess.

The GST for two-wheelers is 28 per cent. There is no compensation cess for models with an engine capacity up to 350cc, and a 3 per cent cess for those over 350cc.

The revised GST structure is expected to eliminate the 12 per cent and 28 per cent slabs, benefiting mass-market cars and two-wheelers. Some sin goods, such as luxury cars, however, may be subject to a 40 per cent tax.

- IANS