🎧 Listen to This Article
India plans to sharply cut taxes on small cars and insurance premiums, a move expected to impact stock markets and the automotive and insurance industries. This initiative is part of the largest GST overhaul since 2017, with product prices likely to fall starting in October once the reform is approved.
According to federal government proposals, GST on small petrol and diesel cars will be reduced from 28% to 18%. The consumption tax on life and health insurance premiums may also drop from 18% to 5% or even zero.
The announcement triggered a nearly 9% surge in shares of Maruti Suzuki, India’s largest small car seller, helping lift the Nifty index by 1.3%. Other automakers such as Mahindra & Mahindra and motorcycle manufacturers like Hero MotoCorp also saw 2–4% gains. Insurance companies including ICICI Prudential, SBI Life, and LIC rose between 2–5%.
Maruti Chairman R.C. Bhargava called the tax rationalization a “huge reform,” emphasizing that lower prices will increase consumer affordability and boost the competitiveness of Indian products.
The new GST structure proposes just two rates—5% and 18%—while the current 28% rate will be abolished. A 40% tax will be applied to luxury and “sin” goods such as tobacco products. Final approval depends on the GST Council, which is expected to meet by October.
Small cars, defined as petrol vehicles under 1,200cc, diesel under 1,500cc, and shorter than 4 meters, have seen declining sales in recent years as consumers shifted to larger SUVs. Small cars accounted for roughly one-third of the 4.3 million passenger vehicles sold in the past fiscal year, down from nearly 50% pre-COVID. With the proposed tax cuts, demand for these vehicles is expected to rebound.
For any questions, clarifications, feedback, or contributions regarding this article, please contact us at editorial@tax.news. We welcome your input and are dedicated to delivering accurate, timely, and insightful tax news. All inquiries will be handled confidentially in accordance with our privacy policy.
