India proposes lowering GST on small cars, insurance premiums, source says

18/8/2025 13:05

India has proposed lowering the Goods and Services tax (GST) on small cars to 18% from the current 28% as part of sweeping consumption tax cuts, a government source said on Monday. The reduction, part of a programme of the deepest tax cuts announced by Prime Minister Narendra Modi since 2017, will boost sales of the country's biggest carmaker Maruti Suzuki among other manufacturers.



The federal government has suggested lowering GST on small petrol and diesel cars to 18% from the current 28%, said the source who is directly involved in the matter.



GST on health and life insurance premiums may also be lowered to 5% or even zero from 18% currently, the same source said.



The tax cuts, if approved, are expected to be announced by Diwali, a major, five-day Hindu festival in October, the source said. Diwali is also the country's biggest shopping season.



Sales of small cars, defined as those having engine capacity below 1200cc for petrol vehicles and 1500cc for diesel and not exceeding 4 metres in length, have slowed over the last few years as buyers switched to bigger, feature-rich SUVs.