India's GST Reduction Proposal to Drive Small Car Sales Surge

In a bid to rejuvenate its automobile sector, India has proposed reducing the Goods and Services Tax (GST) on small cars to 18% from the current 28%. According to a government source, this move forms part of an extensive tax cut strategy unveiled by Prime Minister Narendra Modi last Friday.

If approved, the new tax structure is expected to provide a significant boost to major car manufacturers like Maruti Suzuki, Hyundai Motor India, and Tata Motors. Maruti, which has seen its market share dip substantially over recent years, stands to gain particularly from this initiative. The announcement of the tax cut is anticipated before the Diwali festival, a major shopping season in India.

Besides automobile tax reductions, the government is also considering lowering GST on health and life insurance premiums to between 5% and zero. Details on additional levies for larger vehicles are still being finalized, but there may be an effort to keep overall taxes consistent for these models.

(With inputs from agencies.)