Lok Sabha Question No. 3579 (UNSTARRED), answered on 2024-12-17
Subject: Reduction in Taxes on Cars
Ministry: COMMERCE AND INDUSTRY
Asked by: Shri Gurmeet Singh Meet Hayer

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE

## LOK SABHA

UNSTARRED QUESTION NO. 3579. TO BE ANSWERED ON TUESDAY, THE 17 TH  DECEMBER, 2024.

## REDUCTION IN TAXES ON CARS

## 3579.  SHRI GURMEET SINGH MEET HAYER:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:

## वाणिज्य एवं उद्योग मंत्री

- (a) whether as of October, 2024, approximately 7.9 lakh unsold cars worth 79,000 crore are lying in dealer yards due to declining sales, Inventory levels have rises to 80-85 days compare to the ideal 30-35 days, if so, the details thereof, the effective tax around 42 per cent. on cars has rendered vehicles increasingly unaffordable, if so, the details thereof;
- (b) whether the Government is considering reducing taxes on passenger vehicles to a flat 18 per cent. GST without cess or surcharges to improve affordability for the middle class, if so, the details thereof, if not, the reasons therefor;
- (c) the  details  of  maintaining  high  taxes  on  vehicles  that  are  a  middle-class necessity rather than a luxury; and
- (d) the details of alternative measures that the Government is exploring to support the  automotive sector and alleviate the financial burden on consumers?

## ANSWER

## वाणिज्य एवं उद्योग मंत्रालय में राज्य मंत्री ( श्री णिणिन प्रसाद ) THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY (SHRI JITIN PRASADA)

- (a): Passenger Vehicles posted its highest ever sales in October 2024 of 3.93 Lakh units, with a growth of 0.9% in comparison to October, 2023. This high growth was also reflected in the Vahan vehicle registration data, wherein more than 30% growth in registration was witnessed for Passenger Vehicles in October 2024, compared to October 2023.
- (b): GST  rates  are  based  on  the  recommendation  of  the  GST  Council,  which comprises of representatives from the Union and the State /UT Governments. There  is  no  recommendation  by  the  GST  Council  for  reduction  in  GST  or compensation cess rate on passenger vehicles.
- (c): Based on the factors such as the pre-GST tax incidence, the GST Council has recommended a GST rate of 28% along with the compensation cess applicable as per the category of the vehicle. The Compensation rates are as below:
- (d): Government  approved  the  Production  Linked  Incentive  (PLI)  Scheme  for Automobile and Auto Components Industry in India (PLI-Auto) in September 2021  to  enhance  the  country's  manufacturing  capabilities  for  advanced automotive products, with a budgetary outlay of ₹25,938 crores. The Scheme proposes financial  incentives  to  boost  domestic  manufacturing  of  Advanced Automotive  Technology  products  and  attract  investments  in  the  automotive manufacturing  value  chain.  Its  prime  objectives  include  overcoming  cost disabilities, creating economies of scale and building a robust supply chain in areas of Advanced Automotive Technology products.

|   Sl. No. | Type of Vehicle                                                                                            | Compensation Cess rate   |
|-----------|------------------------------------------------------------------------------------------------------------|--------------------------|
|         1 | Petrol, LPG or CNG motor vehicles with engine capacity less than 1200cc and of length not exceeding 4000mm | 1%                       |
|         2 | Diesel vehicles with engine capacity less than 1500cc and of length not exceeding 4000mm                   | 3%                       |
|         3 | Motor vehicles with length exceeding 4000mm but engine capacity not exceeding 1500cc                       | 17%                      |

|   4. | Motor vehicles of engine capacity exceeding 1500cc but not known as utility vehicles                                    | 20%   |
|------|-------------------------------------------------------------------------------------------------------------------------|-------|
|    5 | Utility vehicles with engine capacity exceeding 1500cc, length exceeding 4000mm and ground clearance of 170mm and above | 22%   |

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