Industry experts said that the recent reduction in Goods and Services Tax (GST) on selected categories of automobiles will drive sales during the upcoming festive season.
Analysts expect the move to provide much-needed support to the two-wheeler segment, which has struggled to recover from the pandemic.
Rajiv Bajaj, Managing Director of Bajaj Auto, highlighted that low-powered motorcycles are likely to benefit significantly.
“This measure will boost consumption and inject momentum into the automotive sector, which remains the pulse of the Indian economy,” noted Santosh Iyer, MD & CEO of Mercedes-Benz India.
The GST cut is projected to reduce vehicle costs by 7-10%, particularly for entry-level and commercial segments.
Prashant Girbane, Director General of the Mahratta Chamber of Commerce, Industries and Agriculture, said that auto manufacturers will pass on these savings to consumers, giving a timely boost ahead of festive purchases.
The GST council has moved high-end cars and motorcycles into the 40% tax bracket, which may temper some positive sentiment, while it has reduced the rate from 28% to 18% for small cars and bikes to stimulate demand among cost-conscious buyers.
Impact on Auto Components & Electric Vehicles
The revised GST regime, effective from September 22, also reduces the rate on auto components to 18%, resolving classification disputes for manufacturers, according to Rajesh Shukla, Tata Motors’ head of indirect taxes.
Anish Shah, CEO & MD of Mahindra Group, welcomed the decision to maintain electric vehicles in the 5% tax slab, stating it will encourage the adoption of cleaner mobility.
Meanwhile, Shenu Agarwal, MD & CEO of Ashok Leyland, noted that the relief for commercial vehicles will reduce transportation costs and stimulate freight traffic, while mitigating the impact of recently imposed US tariffs.
The GST council has also reclassified SUVs over 1,500cc into the 40% tax bracket, removing the earlier 17-22% cess on such vehicles.
This ensures that the reform targets affordability at the lower end of the market while balancing tax revenue from luxury segments.
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