In a significant move set to reshape the Indian automotive landscape, new Goods and Services Tax (GST) rates effective from September 22 have ushered in a wave of tax reductions and discounts across the sector. The changes are poised to benefit both consumers and automakers, potentially driving up sales during the festive season.

GST Rate Changes

The revised GST structure brings substantial relief for small car buyers:

• Small cars now attract an 18% tax rate, down from the previous 28%
• This category includes vehicles with petrol engines under 1200cc and diesel engines under 1500cc, not exceeding four metres in length
• Larger vehicles face a simplified flat 40% tax rate, with the previous cess removed

Automakers Pass on Benefits

In response to these tax cuts, multiple automakers are offering significant discounts to pass on the GST benefits to consumers:

Other major brands including Skoda, Hyundai, Maruti Suzuki, Renault, Nissan, and Honda are also implementing substantial price reductions across their vehicle ranges.

Festive Season Boost

The timing of these GST rate cuts and subsequent discounts coincides with the festive season of Navratri and Diwali. Auto dealers are anticipating a surge in sales, as the combination of tax benefits, manufacturer discounts, and festive spirit is expected to create a favorable environment for car buyers.

Industry Impact

This move is likely to have far-reaching effects on the Indian automotive sector:

1. Increased Affordability: The reduced GST rates, especially on small cars, will make vehicles more accessible to a broader range of consumers.

2. Sales Boost: The substantial discounts offered by automakers, some reaching up to Rs 30.40 lakh for premium brands like Range Rover, are expected to stimulate demand.

3. Market Dynamics: The differentiated tax structure between small and large cars might influence consumer preferences and manufacturer strategies.

4. Economic Stimulus: Increased auto sales could have a ripple effect on related industries and contribute to economic growth.

As the festive season unfolds, all eyes will be on the auto industry to see how these GST rate cuts and discounts translate into sales figures. For consumers, this presents an opportune moment to consider vehicle purchases, with the promise of significant savings across various segments of the automotive market.

In a significant move that promises to reshape India's automotive landscape, the GST Council has approved sweeping reforms to the Goods and Services Tax (GST) structure, set to take effect from September 22, 2025. These changes, dubbed 'GST 2.0', are poised to make vehicles more affordable and potentially boost consumer demand across various segments of the automotive industry.

Key Changes in GST Structure

The reforms introduce a simplified tax structure, consolidating the current four-slab system into two primary rates:

• 5% GST rate
• 18% GST rate

This restructuring comes with the phasing out of additional cesses, which previously ranged from 1% to 22% on top of the 28% GST for various vehicle categories.

Impact on Different Vehicle Segments

Small Cars and Two-Wheelers

• GST reduced from 28% to 18%
• Applies to small cars and two-wheelers up to 350cc

Commercial Vehicles

• Buses, trucks, and three-wheelers will see GST drop from 28% to 18%

Mid-Size Cars

• GST to increase from 28% to 40%
• Overall tax burden decreases due to removal of additional cess

SUVs

• Will attract 40% GST

Electric Vehicles

• Maintain the current 5% GST rate

Auto Parts

• GST reduced from 28% to 18%

Consumer Benefits

The reforms are expected to translate into significant savings for consumers:

• Price reductions ranging from ₹65,000.00 to ₹3.50 lakh
• Savings vary depending on the vehicle model and manufacturer

Industry Response

Major automakers have already begun revising their prices to pass on the tax benefits to consumers. Companies that have announced price adjustments include:

• Maruti Suzuki
• Tata Motors
• Hyundai
• Mahindra
• Toyota
• Skoda
• Renault
• Kia

Objectives and Expected Outcomes

The GST 2.0 reforms aim to:

1. Make vehicles more affordable across various segments
2. Boost consumer demand in the automotive sector
3. Particularly benefit first-time buyers and families

Implementation Timeline

The new GST structure is scheduled to come into effect on September 22, 2025, giving both the industry and consumers time to prepare for the changes.

This overhaul of the GST system represents a significant shift in India's taxation policy for the automotive sector. As the implementation date approaches, it will be crucial to monitor how these changes impact vehicle sales, consumer behavior, and the overall health of the Indian automotive industry.