In the GST rate rejig announced on Wednesday, bikes under 350cc engine capacity and small cars get a tax cut of 10 percentage points. They now go down into the 18% bracket as the 28% slab stands abolished.
The motorcycles, and two-wheelers in general, over 350cc, and the bigger cars will come under the new 40% slab for luxury goods, when this rejig comes into effect on September 22.
All electric vehicles remain in the 5% bracket.
What’s a small car?: Cars that have petrol engines up to 1200cc, or diesel up to 1500cc, and length not exceeding 4000 mm, are smaller cars. These cars will now be at 18% GST, down from 28%, which means the Altos and i10s etc will come for less.
Ambulances and three-wheeled vehicles will be in the 18% bracket, down from 28% (the slab that’s now abolished).
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What about bigger bikes?: Bikes bigger than 350cc engines will now be more expensive, mostly hitting Royals Enfield and other makers who make cruisers and such bikes. Their earlier tax rate was 28%, plus 3-5% cess, taking it to around 32%. Now there’s no cess but the flat rate is 40%, meaning more tax.
What about bigger cars?: Cars that do not meet the ‘small car’ definition will be taxed at 40%. That does not necessarily mean more tax of the Thar and Safaris and such SUVs or sedans. The earlier tax rate was 28%, plus there was a cess of up to 22%, thus a total of nearly 50%. That now becomes a flat 40%. That’s a benefit for the end user.
Also read | Full list of items impacted by GST rate rejig
This rejig comes after PM Narendra Modi announced rationalisation of the slabs. There will no longer be the 12% and 28%, slabs, meaning only two of the earlier four slabs will remain: 5% for essentials and 18% for non-essentials. A 40% slab is introduced for “sin goods” such as the bigger bikes, tobacco, and cars costing ₹50 lakh and above, among other items.