The government has announced sweeping reforms for the Goods and Services Tax (GST) structure, which includes reductions in taxation for new cars. Notably, GST on new sub-4-metre cars with up to 1,200cc petrol engines and up to 1,500cc diesel engines has been shaved from 28 percent to 18 percent. Larger cars will be taxed at a flat 40 percent rather than 45-50 percent. The cess has also been removed for a simpler tax structure, with the base GST rate instead being increased to compensate.
These GST reductions mean that compact car prices could soon drop by significant amounts. To show you the kind of savings you can expect, we’ve selected the three most popular compact SUVs – the Maruti Suzuki Brezza, Tata Nexon and Mahindra XUV 3XO – and the five most popular hatchbacks – the Maruti Suzuki Alto K10, Swift, Wagon R, Hyundai i20 and Tata Tiago – and calculated their reduced prices (indicative) in accordance with the new GST reductions.
Compact SUV price drops as per new GST reform
Nexon and XUV 3XO fulfil the 18 percent GST criteria
The Brezza, Nexon and XUV 3XO measure under 4 metres in length, so that’s one ‘small car’ criterion cleared for all of them. Additionally, both the XUV 3XO and Nexon come with 1.2-litre turbo-petrol engines and 1.5-litre turbo-diesel engines, so they fully qualify for the GST reduction to 18 percent.
Brezza’s 1.5-litre petrol engine bumps it up to the 40 percent GST category
However, the Brezza is a curious case here, as it’s powered by a sole 1.5-litre petrol engine. Since the Brezza’s engine displacement exceeds the stipulated criterion of up to 1,200cc, the Maruti Suzuki compact SUV will technically fall under the ‘large car’ category, which entails a GST rate of 40 percent.
It’s worth noting that the pre-reform GST rate for cars with up to 1,500cc engines was 45 percent, so the Brezza will still see a price reduction, albeit not as much as the Nexon and XUV 3XO.
To calculate the estimated revised prices, we’ve used the current base GST rate of 28 percent with an additional cess of 1 percent for petrol vehicles and 3 percent for diesel vehicles (the Brezza has a 17 percent cess due to its larger engine). This results in an effective pre-reform GST rate of 29-31 percent (45 percent for the Brezza) on the ex-showroom prices.
We then worked our way backwards to obtain the tax-free pricing for each car, and then applied their respective post-reform GST rates to arrive at the revised ex-showroom prices. Here’s how ex-showroom pricing for the Brezza, XUV 3XO and Nexon could look once the new GST rates kick in from September 22 onwards:
| Maruti Brezza, Tata Nexon, Mahindra XUV 3XO GST cut price comparison | |||||
|---|---|---|---|---|---|
| Current price range (Rs, lakh) | Pre-reform GST rate | Reformed GST rate | Adjusted price range (Rs, lakh) | Difference (Rs) | |
| Brezza petrol | 8.69-13.98 | 45 percent (28 percent GST + 17 percent cess) | 40 percent | 8.39-13.50 | 30,000-48,000 |
| Nexon petrol | 8.00-14.70 | 29 percent (28 percent GST + 1 percent cess) | 18 percent | 7.32-13.44 | 68,000-1.26 lakh |
| Nexon diesel | 10.00-15.60 | 31 percent (28 percent GST + 3 percent cess) | 18 percent | 9.01-14.05 | 99,000-1.55 lakh |
| XUV 3XO petrol | 7.99-15.80 | 29 percent (28 percent GST + 1 percent cess) | 18 percent | 7.31-14.45 | 68,000-1.35 lakh |
| XUV 3XO diesel | 9.99-14.99 | 31 percent (28 percent GST + 3 percent cess) | 18 percent | 9.00-13.50 | 99,000-1.49 lakh |
Evidently, the diesel variants of the XUV 3XO and Nexon will see the highest price drops. The Brezza price reductions, meanwhile, will be relatively modest. In fact, the Nexon’s top-spec petrol variant will be more affordable than that of the Brezza once the GST reform goes into effect.
Hatchback price drops as per new GST reform
Prices could be reduced by up to Rs 1.38 lakh
Like the Nexon and XUV 3XO, every hatchback here is under the 4-metre mark and is powered by a petrol engine under 1,200cc, thereby qualifying for the 18 percent GST slab. Here’s a breakdown of how their current ex-showroom pricing may change following the GST revision:
| Maruti Alto K10, Tata Tiago, Wagon R, Swift, Hyundai i20 GST cut price comparison | |||||
|---|---|---|---|---|---|
| Current price range (Rs, lakh) | Pre-reform GST rate | Reformed GST rate | Adjusted price range (Rs, lakh) | Difference (Rs) | |
| Alto K10 | 4.23-6.21 | 29 percent (28 percent GST + 1 percent cess) | 18 percent | 3.76-5.53 | 47,000-68,000 |
| Tiago | 5.00-8.55 | 29 percent (28 percent GST + 1 percent cess) | 18 percent | 4.45-7.61 | 55,000-94,000 |
| Wagon R | 5.79-7.62 | 29 percent (28 percent GST + 1 percent cess) | 18 percent | 5.15-6.78 | 64,000-84,000 |
| Swift | 6.49-9.65 | 29 percent (28 percent GST + 1 percent cess) | 18 percent | 5.78-8.59 | 71,000-1.06 lakh |
| i20 | 7.51-11.25 | 29 percent (28 percent GST + 1 percent cess) | 18 percent | 6.68-10.01 | 83,000-1.24 lakh |
| i20 N Line | 9.99-12.56 | 29 percent (28 percent GST + 1 percent cess) | 18 percent | 8.89-11.18 | 1.10 lakh-1.38 lakh |
It should be noted that the prices calculated here are indicative, not final. There might be some variance in the benefits that are actually passed on to the customer.
All prices are ex-showroom, India.
WITH INPUTS FROM UDAY SINGH
