GST Council Meeting Tomorrow: Here's What It May Hold For Auto Industry

The 56th GST Council meeting is slated for September 3 (tomorrow) and September 4 in New Delhi. While there are uncertainties and speculations surrounding potential changes in the Goods and Services Tax (GST), the auto industry is expecting a reduction in the taxes levied on small cars and two-wheelers. The impact of the speculations can already be seen on the auto industry, with changes in the prices of the stocks. Here we take a look at what might be in the store for the industry.

56th GST Council

The meeting is scheduled to begin tomorrow at 11:00 AM based on the memorandum issued by the GST council. The meeting will be led by Union Finance Minister Nirmala Sitharaman and will include finance ministers from every state and Union Territory, along with high-ranking officials from the Centre.

The main agenda for the meeting includes proposals to simplify GST rates with a focus on the 5 per cent and 18 per cent slabs. There are also plans to eliminate the 12 per cent and 28 per cent slabs, rationalising the tax structure. Meanwhile, there are chances of application of a 40 percent tax for luxury items, sin goods, and demerit goods.

The agenda is also expected to include significant changes covering return submissions, refunds, and compliance. If changes are implemented, the GST rates might be reduced, and numerous products will be more affordable for consumers.

Major Changes Expected For Auto Industry

As mentioned earlier, the small car segment is expected to experience a potential reduction. This will bring down the tax on small cars to 18 percent as opposed to 28 per cent, which includes additional cess. It is worth mentioning that the cess varies depending on the powertrain of the vehicle, bringing the final rates ranging between 29 and 50 per cent (for large SUVs).

Lowering the GST on smaller cars to 18 per cent will decrease their prices by up to 10 per cent, improving their affordability. This might encourage a larger number of individuals, particularly first-time buyers and middle-class households, to purchase cars. Additionally, it stimulates car sales and provides support to automobile manufacturers. This also means there might be a separate tax bracket for bigger cars (with engines over 1200 cc).

Meanwhile, the two-wheeler industry is also expecting changes in the tax structure. Once the revised tax regime is implemented, small motorcycles, particularly the models under 350 cc, are expected to have 18 per cent GST. At the same time, motorcycles with higher capacity engines might have 40 per cent GST.