Government Mulls GST Reduction on Cars

Nirmala Sitharaman, Finance Minister, two days ago, stated that the government is considering GST reduction on cars in the foreseeable future as a method to revive automobiles sales which have come under 28% slab. Nevertheless, whether the GST on cars will be reduced or not depends on the decision of the GST Council. 

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The Government has also consulted about the GST reduction on cars with numerous sectors and is weiging all the opinions. Earlier, on August 23, several other measures have been announced by the government with a view to incentivizing the automobile sales. For example, lending and liquidity in the market have been enhanced to increase the demand in the automobile sector. Moreover, the depreciation cost of cars and bikes bought until March 31, 2020 will be raised from 15% to 30%. The registration fee for cars will experience no increase until June 2020.

Numerous methods are being considered to boost the automotive sales in India.

A scrappage policy is also being considered by the government to boost the automotive sales, address the serious pollution in India as well as creating new business and employment opportunities. Moreover, Sitharaman also stated that the BSIV-compliant vehicles can operate on Indian roads until March 31, 2020 before the new more stringent BSVI emission standards come into effect in April 2020.

At a GST council meeting which recently took place, the GST rates on electric vehicles have been confirmed to be decreased from 12% to 5%. The GST rates on chargers for the EVs have also dropped from 18% to 5%. These methods have been implemented in order to encourage the sales of electric vehicles.

Now, the Indian government wants EVs and ICE-powered vehicles to enjoy an equal market share in India. 

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Nevertheless, the process to electrify all the vehicles in India is a long way to go. For the time being, the government wants electric vehicles and ICE-powered vehicles to have equal market share without pushing one at the expense of the other. Hence, GST reduction on cars can be a good idea to push the market out of the prevailing situation of sales slump.