When it comes to cars, the GST has increased. However, there has been a problem in interpreting how the GST actually affects the buyers

Durga Pujo and Navaratri are over, but India’s festive season is still on, with Diwali less than a week away. And when we think about Diwali, we must think of Dhanatrayodashi, also known as Dhanteras, which marks the first day of the festival.

On Dhanteras, buying gold, silver, or utensils has always been a custom, as it invokes Goddess Lakshmi's blessings of wealth and prosperity. However, in recent times, people have started purchasing other items as well, given that it is an auspicious occasion. As a result, during Diwali, automobile sales also surge.

However, this season, people have certain reservations about buying cars due to the 40 per cent GST hike. It is unfortunate that only a few media houses have decoded what the 40 per cent hike truly means, whereas most have projected it as if it had gone up from zero to 40. Fortunately, this is not the case, and the hike doesn't significantly impact consumers' finances.

Old rate

(Credit- Bru Times)

For the unversed souls, earlier, cars above 4 metres in length, with an engine size of 1,500cc or above and a ground clearance of 170mm, incurred a 50 per cent tax. This 50 per cent came from 28 per cent GST plus 22 per cent cess. A cess tax is levied by the government to fund various purposes, such as education, healthcare, or infrastructure, but unlike general taxes, it cannot be used to cover government expenses.

Moving on to luxury cars, the previous rate stood at 48 per cent (28 per cent GST + 22 per cent cess tax).

New GST hike

Now, as per the new GST hike, cars above 4 metres in length, with an engine size of 1,500cc or above and a ground clearance of 170mm, incur a GST of 40 per cent. However, people fail to realise that the cess tax has been omitted. In short, you only pay 40 per cent GST instead of paying 50 per cent tax (28 per cent GST plus 22 per cent cess). Therefore, car prices have actually gone down; in this case, by 10 per cent.

(Credit- Goodwood)

And what about large or luxury cars? Before the new rates, this category of cars used to incur 48 per cent (28 per cent GST plus 20 per cent cess). Now, if you purchase a car in this category, you will only have to pay 40 per cent GST, so there is a price reduction of 8 per cent.

Small cars

Small cars, i.e., cars with engine sizes up to 1200cc (petrol) or 1500cc (diesel) and a length not exceeding four metres, now attract only 18 per cent GST, down from 28 per cent, whereas in the EV category, the GST remains unchanged at 5 per cent.

(Credit- EVO India)

The revised rates benefit your purchase compared to how it has been portrayed, i.e., the overall hike percentage, and have not been clearly explained by a majority of media houses and automobile influencers. Last but not least, do check out the websites of car brands, as during this festive season, they offer heavy discounts and other offers on car purchases.