The government’s proposal to revise GST rates on cars promises some relief, but for many middle-class Indians, the cost of car ownership still stings.
As one chartered accountant put it: “Buy one car, give one to the government.”
In a recent analysis, CA Kapil Gupta broke down the proposed changes. Under the new structure, GST on small cars is expected to drop from 29% to 18%. While this reduction could ease entry-level pricing, the changes for larger vehicles are marginal. Mid-size cars and SUVs, previously taxed at 43% and 50%, would likely move to a flat 40%.
For a middle-class individual already paying high income taxes and burdened by other living costs, the math simply doesn’t add up.
Beyond GST: The Hidden Costs
The GST reduction is just one piece of the puzzle. Gupta pointed to other significant expenses that could erase any potential savings:
- Fuel
- Tolls
- State Road Taxes (which range from 5% to 21%)
If states raise these additional taxes, the benefit of a lower GST could vanish. As Gupta warned, “The net gain for the buyer may be purely theoretical.”
He also questioned the policy of taxing mid-size cars and SUVs as luxury items. For many larger families, such vehicles are a necessity, not an indulgence.
While the industry may gain from this reform, Gupta argued that real, structural relief for the middle-class buyer is still missing.