Mint Quick Edit | GST rates for cars reveal a blind spot

4 months ago 7

ARTICLE AD BOX

The add-on cess applicable to fancier sets of wheels has been dropped but four-wheelers remain split into two slabs based on length and engine capacity. (Bloomberg)

Summary

Pardon would-be car buyers for asking why India’s GST regime for vehicles will stay so complex. And why the latest rate revisions seem to hand clean mobility a raw deal.

India’s GST reform is welcome, but prospective car buyers can be pardoned for wondering if the revised rate structure for vehicles will remain almost as complex as it was. The add-on cess applicable to fancier sets of wheels has been dropped, to their relief, but four-wheelers remain split into two slabs based on length and engine capacity.

As part of an exercise to keep GST as progressive as possible, with the rich bearing a heavier burden, cars longer than 4 metres with engines larger than 1,200cc using any petrol (and 1,500cc using diesel) will qualify for the new luxury slab of 40% tax, while those below these thresholds bear 18%.

With the cess gone, all these will be taxed less, but this would also reduce the price advantage of electric vehicles taxed at an unchanged incentive rate of 5%. Also, as hybrid cars with a relatively low carbon exhaust will continue to be taxed at the same rate as their fully fossil-fuel-burning size equivalents, car buyers hoping for GST-incentivized “bridge" technology for cleaner mobility have been left disappointed.

In further iterations of GST policy, perhaps this cause will get more attention. Of course, the reset has wider economic aims, but climate action is important too.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.