Centre Govt likely to reduce GST on cars and two-wheelers

In the upcoming Goods and Services Tax (GST) rate rationalisation, the Centre is expected to lower the tax on passenger vehicles (PVs) and two-wheelers, making them more affordable ahead of Diwali.

The Finance Ministry has sent its proposal to the GST Council for two GST rates of 5 per cent and 18 per cent across all goods, which will replace the existing four slab structure. The GST Council, comprising State Finance Ministers, is expected to meet in September to approve the



proposal.

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.

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.