Tata Motors plans to pass on a 4% reduction in India's central value-added tax to its customers.

The Indian government on Sunday announced an across-the-board cut in the ad valorem cenvat (central value added tax) rate on all products other than petroleum and products where the rate was already less than 4%, Reuters reported.

Britain's chancellor (finance minister) recently cut this country's value-added tax (VAT) rate to 15% from 17.5% in an effort to spur the economy.

"Tata Motors will pass on to customers the benefit that will come in through the cut in cenvat. This is across products - passenger and commercial vehicles," Tata said.

Maruti Suzuki said the cut would lead to a reduction in car prices by 4%.