Should you cancel car loan you just took for GST benefit: experts weigh in

The recent GST rate cut on cars can save you up to ₹1.5 lakh, but timing and paperwork matter, says expert

As the GST rate cut on cars takes effect from September 22, buyers are weighing whether to delay their purchase or renegotiate their loans to capture the benefit. The answer, say experts, depends on where you are in the purchase process and whether your loan has been disbursed.

 

“For cars priced between Rs 10-15 lakh, the effective savings can range anywhere from Rs 50,000 to over Rs 1.5 lakh, depending on the model and category,” said Amit Setia, chief business officer-car loans, Capri Loans.

 

“Buyers in the small car segment will see the maximum benefit, while mid-size buyers will see moderate relief,” he said.

 

How much you can save

The new GST structure has brought meaningful savings for most mass-market buyers:

 

• Small petrol cars (under 4m, up to 1200 cc): tax falls from 29 per cent to 18 per cent-- 11 per cent price cut 
• Small diesel cars (under 4m, up to 1500 cc): tax falls from 31 per cent to 18 per cent-- 13 per cent price cut 
• Mid-size cars (above 4m, up to 1500 cc): tax falls from 45 per cent to 40 per cent -- 5 per cent price cut

 

No need to cancel booking

According to Setia, buyers don’t have to cancel and re-book to avail of the benefit.

 

“If the billing is not done by the dealer, the buyer is eligible for GST benefit automatically. Dealers are expected to pass on the revised pricing directly after September 22,” he said.

 

Should you cancel your car loan?

The math gets tricky if your loan has already been disbursed. “If the amount is already with the dealer, customers will have to pay interest for the period the funds were parked and also bear the cost of non-refundable processing fees, which will have to be paid again for a fresh loan,” Setia cautioned.

 

Banks and NBFCs treat this as a foreclosure followed by a fresh sanction, which could mean higher costs if the loan is reissued.

 

Invoice generated? No GST refund

Setia added a word of caution for those who have already driven home their car: “Once a vehicle is invoiced, delivered and registered, the GST charged becomes final. Refinancing or restructuring will not give you any benefit, and the costs will likely outweigh any notional saving.”