GST on luxury cars: Mercedes, BMW, Audi can see a price fall; Check likely price reductions

Diwali came early for 1.4 billion consumers when the GST -Council announced a large tax overseeing on Wednesday, leaving only two records behind and reduced the prices of more than 400 articles. Although essential products become cheaper under the reforms of the ‘next gene’, luxury cars have been placed in a ‘special plate’ that attracts a tax rate of 40%.

The move will offer lighting for high-quality vehicles, because the earlier 20-22% compensation-stop on luxury cars has been removed. Previously, buyers of premium cars from brands such as Mercedes-Benz, Audi and BMW paid up to 50% in total taxes. Under the new structure, these vehicles will now be confronted with a flat load of 40%, making them more attractive to buyers.

The GST changes are part of the transition to “GST 2.0”, a simplified two-slab system of 5%and 18%, with a special 40%plate reserved for sin and luxury goods. The reform also includes the planned abolition of the compensation -stop, expected on 31 October, which will simplify compliance for manufacturers and dealers.

Read more: New GST rates list 2025: Full list of items with revised rates in the power of Navratri, September 22

Luxury cars were previously subjected to a compensation provision of 20-22% on top of 28% GST, depending on their classification. Under the new structure, these vehicles will now be taxed on a flat 40%, which translates into a saving of 8-10%.

Possible change in the prices of top models

Note: These prices are based on calculations, based on a 10% reduction after moving these cars to the 40% GST plate. The prices have been approached and are based on ex-showroom prices. Check your nearest showroom to understand the changes.

India’s luxury car market

Luxury cars currently have just over 1% market share in India – the lowest of the large economies. However, the country offers sufficient growth potential in the medium to long term, since it is home to one of the highest number of billionaires worldwide, industry experts told ET.

Read more: GST 2.0 FAQS: Which cars are just cheaper and which are more expensive? From insurance to gold to cigarettes, all important new price information here

Between 2023 and 2028, India will see the highest increase for each country in the number of ultra-high-network-worthy individuals (Uhnwis), with a net value of $ 30 million or more, according to the flagship study of Knight Frank, ‘The Wealth Report 2024’. The number of ultra-rich Indians is expected to increase by 50%to 19,908 in 2028 of 13,263 in 2023. India will be followed by China (47%), Turkiye (42.9%) and Malaysia (35%), according to the report.

How will the GST reforms help India?

The urge for higher domestic consumption is part of Modi’s wider strategy to increase the self-reliance of India in the midst of rising protectionism around the world and trend that he is criticized as economic egoism. Trump doubled the rate on Indian goods last week to 50% as a punishment for buying Russian oil.

The GST cuts are a “step towards self-reliance” and will help both consumers and industry, said Trade Minister Piyush Goyal on Thursday during an event in New Delhi. He also insisted on the companies to pass on the benefits of lower taxes to consumers.

Citigroup Inc. estimates that the combined rate of 50% is a 0.6-0.8 percentage of downward risk for the annual GDP growth of India. With 50%, the highest rate among Asian countries, Indian exporters are afraid of being decimated and have warned of massive job losses.

Sitharaman said that the GST reform was not influenced by the rate rust and will have a “very positive” impact on India’s GDP.

“We believe that GST is not a static situation – when the rates fall, the buoyancy increases,” said income secretary Shrivastava. “We expect people to come out and buy more when taxes are lowered.”