India plans to lower the consumption tax on small cars to 18%

Indian government sources said that India has proposed reducing the goods and services tax on small cars from the current 28% to 18% as part of a large-scale consumption tax reduction package.

Reuters, citing sources, reported that the Goods and Services tax (GST) on health and life insurance premiums may also be reduced from the current 18% to 5% or even zero.

Sources said that if the tax cut plan is approved, the government is expected to announce it before the five-day important Hindu festival of Diwali in October. Diwali is also the largest shopping season in India.

As soon as the news broke, Indian auto and consumer stocks rose immediately, with the auto index climbing nearly 5% to a 10-month high.

This tax cut is the largest tax cut plan announced by Indian Prime Minister Modi since 2017, aiming to boost the sales of automakers such as Maruti Suzuki, India's largest automaker.

Currently, India is proposing the largest-scale reform in its history, adopting a dual-tax rate structure of 5% and 18%, and eliminating the 12% and 28% tax rates. This plan is expected to make a large number of goods such as butter, juice and dried fruits cheaper, which is beneficial to both businesses and consumers.

Sources said that the relevant committee will decide on the final tax rate in October and then implement it nationwide.