Ahead of Diwali, the government is planning to reduce GST on small cars and insurance premiums. The proposal includes reducing GST on small petrol and diesel cars from 28% to 18%, and on health and life insurance premiums from 18% to 5%, or even completely removing it. The proposal will be sent to the GST Council meeting on September 9 for discussion.
New Delhi: With an initiative from Prime Minister Narendra Modi, consumers are likely to get a big relief before Diwali. The central government is preparing to reduce GST on small petrol and diesel cars and insurance premiums. There is consideration to reduce the GST on cars shorter than four meters from 28% to 18%, and on health and life insurance premiums from 18% to 5%, or to eliminate it entirely. This proposal has been sent for discussion at the GST Council meeting to be held on September 9, and if approved, the biggest GST reform in the country since 2017 will be implemented.
Proposal to Reduce GST on Small Cars
According to government sources, the government is considering reducing the GST on small cars (petrol engines up to 1,200cc and diesel engines up to 1,500cc) up to four meters in length from the current 28 percent to 18 percent. This will not only reduce the prices of these cars but is also likely to increase sales.
Small cars previously accounted for about half of the market, but with the increasing demand for SUVs and luxury cars, their share has now fallen to about one-third. This step will help companies like Maruti Suzuki, Hyundai, and Tata Motors to increase sales.
Separate Slab for Large Cars
The government is also preparing a separate slab for large cars and luxury vehicles. A 40 percent GST slab can be applied to large cars. Currently, they are subject to 28 percent GST and up to 22 percent cess, bringing the total tax to 43-50 percent. With this change, consumers will feel an increase in the prices of large cars.
Relief in Insurance Premium
The government is also preparing to reduce GST on health and life insurance policies. GST on health and life insurance premiums is being considered to be reduced from 18 percent to 5 percent or completely removed. With its implementation, the premium of the policy will become cheaper, and people will be able to easily get coverage.
Relief to Consumers and MSMEs
This step is not limited to just cars and insurance. The government's goal is to further simplify GST. Under this, the 12 percent slab can be removed, and two main slabs can be created – Standard and Merit. Apart from this, the compensation cess applicable to luxury and sin goods (such as coal, tobacco, aerated drinks, and large cars) will end in March 2026. After this, there will be more scope to reduce GST rates.
On the occasion of Independence Day, the Prime Minister had said that next-generation GST reforms would be brought to give relief to consumers and the MSME sector. This proposed change is likely to make this goal a reality.
Impact on Retail Season in October
According to government sources, if the proposal is approved, this announcement can be made before Diwali. October is the biggest retail season in India, so the impact of this reform will reach consumers immediately. In addition, the Bihar assembly elections are also to be held during this time, which will increase positive sentiment among consumers.
