Car Knowledge

The GST rate cut on hatchbacks marks a transformative shift in India’s automotive tax structure. GST (Goods and Services Tax), a unified indirect tax, replaced multiple state and central levies. Under the current car taxation framework, most hatchbacks, small cars under four meters and up to 1,200 cc (petrol) or 1,500 cc (diesel), are taxed at 28% GST plus a compensation cess of 1% to 3%, bringing total taxation to 29–31%.

As part of one of the tax reforms, the government has proposed a GST rate cut on hatchbacks, reducing GST to 18% slab while collapsing the number of GST tiers to two (5% and 18%) and doing away with the 12% and 28% slabs entirely.