Govt Removes Sales Tax Hike on Small Cars – Alto Prices to Drop

In a major reprieve for budget-conscious buyers, the PML-N-led coalition government has abandoned plans to increase sales tax on entry-level vehicles like the Suzuki Alto, following strong opposition from Parliament.

Key Decisions

• No GST increase on 850cc cars (remains at 12.5%)
• Hybrid vehicles up to 1800cc retain current tax rate
• Proposed 1% additional levy on all cars scrapped for small vehicles

Why the Reversal?

• Senate Standing Committee unanimously opposed the hike
• Senator Saleem Mandviwalla argued:
  “An 18% flat tax on Rs. 3 million cars is unjustifiable.”
• Alternative proposals suggested moderate 14-15% rates

Alto Price Impact

Broader Implications

• Win for middle-class buyers amid high inflation
• Auto industry relief after sales slump
• IMF recommendations balanced with public affordability

Stakeholder Reactions:

• Dealers: “This prevents further market contraction.”
• Consumers: “Alto was becoming unaffordable.”
• Finance Ministry: “Reforms will continue with equitable taxation.”

What’s Next?

• Budget 2025-26 finalization this week
• Focus shifts to luxury vehicle taxation
• Hybrid policy review expected

Pro Tip:

Buyers should confirm prices with dealers, as some pre-hike stock may still carry old rates.