New Delhi: India is planning a significant Goods and Services Tax (GST) overhaul this year. With the largest overhaul since 2017 in the GST, the prices of small cars in the country might see a notable drop – probably a reduction of around 8 percent. The change might happen if the government decides to cut the current GST rate from 28 percent to 18 percent, Economic Times reported, citing sources.

The move reportedly follows sluggish growth in the small car segment as customers are increasingly purchasing larger, feature-rich SUVs. The small car segments which might see a reduction in the cost are defined as vehicles under 4-metres in length, with engines up to 1200cc (petrol) and 1500cc (diesel).

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Notably, automakers like Maruti Suzuki might be the biggest beneficiaries of the move as most of their sales are from sub-1200cc cars. Car models such as the Alto, Wagon-R, and Dzire may witness a significant price drop.

The report said that the Union Government has suggested reducing the tax on both small petrol and diesel cars from 28% to 18%, along with cutting the GST on health and life insurance premiums to 5 percent. At present, passenger vehicles (PVs) attract GST in the range of 29 percent to 50 percent, as a cess is imposed on top of the standard 28 percent GST rate depending on the size and length of the vehicle.

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Meanwhile, the GST for larger cars will also be restructured, with vehicles with bigger engines currently taxed at nearly 50 percent (28 percent GST plus up to 22 percent cess) may be shifted to a 40 percent special rate.