Daijiworld Media Network – New Delhi

New Delhi, Aug 17: The Centre is planning a major GST overhaul for automobiles, shifting from vehicle-type classification to engine-capacity-based categories, sources told NDTV Profit.

Under the proposal, small cars below 1200cc could attract a lower GST of 18%, down from the current 28% plus applicable cess, while bigger cars above 1200cc would remain in a higher-tax bracket. The move aims to boost demand in the entry-level segment.

The current SUV definition under GST—which factors in engine size, length, and ground clearance—may be removed to simplify the structure and reduce ambiguity. Currently, entry-level hatchbacks, small sedans, and compact SUVs attract the highest 28% GST plus cess up to 22%.

Final decisions are expected after further discussions within the Group of Ministers (GoM) overseeing GST reforms. The panel, headed by Bihar Deputy CM Samrat Chaudhary, is scheduled to meet this week to deliberate on the Centre’s proposed pillars for GST 2.0.