The budget announcement is around the corner as everyone is bracing for some relief and tax benefits in every sphere of life
In this post, we shall try to take a look at the factors which could result in cheaper cars after the 2025 budget. Note that the full Union Budget for 2024-25 will be presented by Finance Minister Nirmala Sitharaman on February 1, 2025. It won’t be wrong to say that the taxpayers are hoping for tax reforms including revised income tax slabs, lower GST rates, regulatory updates and capex allocation announcements. This will be Nirmala Sitharaman’s second full-fledged budget under the Narendra Modi-led NDA government and her 8th overall budget representation in Parliament. However, as automobile professionals, we would like to see some positive changes in our industry from the tax aspect.
Will Cars Get Cheaper After 2025 Budget?
At the moment, there are taxes (GST + Compensation Cess) ranging from 29% to 50% on various cars sold in the Indian market. The categorization depends on the size of the car, its engine capacity and laden ground clearance. This incorporates 28% GST and compensation cess from 1% to 22%. Hence, in the more expensive and large SUVs, half the cost of the car is actually the tax that you are paying to the government. What’s worse is the fact that you are paying for this from the salary that you received after paying the income tax. Clearly, these are some hefty taxes. Once you buy the car, you are further paying taxes on insurance premiums, registration, road tax, excise duty and VAT on fuel and toll tax on expressways.
Another key area to consider is the taxes on hybrid cars. Now, the government wants to cut India’s carbon footprint. As a result, it is promoting EVs and hybrid cars. However, the tax on hybrid cars is a whopping 43%. This includes 28% GST and up to 15% Compensation Cess (if a car is over 4 m long). On the contrary, the EVs experience a tax of just 5%. One can’t help but think that since the aim is to reduce tailpipe emissions, why are hybrid cars taxed so steeply. Thereafter, it would also be crucial if we get to witness some relief in the form of road tax or compensation cess on the new car when we send our old vehicle for scrappage. Finally, it will be convenient if we bring petrol and diesel under the purview of GST. This will allow a uniform fuel price across the nation.
My View
All these are the pain points for customers, as well as carmakers. If the upcoming budget addresses these issues thoroughly, it is almost a foregone conclusion that the automobile industry will thrive. The demand for new cars and hence, the sales, will go up strongly. Once potential car buyers see a distinct relaxation in taxes on new cars including hybrids and EVs, advantages of scrapping their old cars and uniform fuel prices under GST, the automobile industry will benefit a lot. Let us keep our fingers crossed and hope that we get something like this in the budget.
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