Reactions on GST cut: A tailwind for the auto sector

 SHAILESH CHANDRA, PRESIDENT, SIAM: Welcoming GST Announcements by the Ministry of Finance, Shailesh Chandra, President, SIAM, said, “Automobile Industry welcomes the Government’s decision to reduce the GST on vehicles to 18% and 40%, from earlier rates of 28% to 31% and 43% to 50%, respectively, especially in this festive season. This timely move is set to bring renewed cheer to consumers and inject fresh momentum into the Indian Automotive sector. Making vehicles more affordable, particularly in the entry-level segment; these announcements will significantly benefit first-time buyers and middle-income families, enabling broader access to personal mobility.

We also thank the Government of India for continuing with GST rate of 5% on Electric Vehicles, which will help sustain the ongoing momentum towards sustainable mobility. Furthermore, the resolution of classification interpretations and the correction of the inverted duty structure will greatly streamline business processes across the automotive industry, supporting ease of doing business. We are confident that the Government will also soon notify suitable mechanisms for the utilisation of compensation cess on unsold vehicles, ensuring a smooth and effective transition.”

ACMA WELCOMES UNIFORM 18% GST RATE ON AUTO COMPONENTS:  Suri Marwah, President, ACMA, said, “On behalf of the auto component industry, I extend our deep gratitude to the Hon’ble Prime Minister, Shri Narendra Modi, and the Hon’ble Finance Minister, Smt. Nirmala Sitharaman, for this historic reform. The rationalisation of GST to a uniform 18% across all auto components has been a long-standing recommendation of ACMA. This decisive step will curb the grey market, encourage the use of quality compliant components, ease compliance, and support MSMEs - thereby strengthening the global competitiveness and resilience of India’s USD 80.2 billion auto component industry.”

She added, “We also welcome the GST Council’s approval for faster export refund claims through ICEGATE for smaller exporters, which will help clear pending shipping bills and significantly ease liquidity constraints.”

FADA PRESIDENT C S VIGNESHWAR : "The 56th GST Council meeting marks a watershed moment for India’s automobile retail industry. FADA warmly welcomes the bold and progressive reforms which simplify the tax structure, lower rates for mass mobility, and bring consensus across all States. This is a decisive step that will boost affordability, spur demand, and make India’s mobility ecosystem stronger and more inclusive. We thank the Hon’ble Prime Minister, Finance Minister, and the GST Council for taking such a courageous decision with unanimity. As the country heads into the peak festive season, glitch-free implementation will be the key to ensuring that the benefits seamlessly reach customers. One area that may needs earliest clarification is about levy and treatment of cess balances currently lying in dealers’ books, so that there is no ambiguity during transition. FADA remains committed to working closely with the Government and GST Council to make GST 2.0 a model reform — simple, transparent and growth-oriented for both industry and consumers."

VINOD AGGARWAL, VICE CHAIRMAN EML AND MANAGING DIRECTOR & CEO OF VE COMMERCIAL VEHICLES: “The GST reform announced yesterday is a very positive and pro-growth move that will immediately lift consumer sentiment and boost demand across a broad range of sectors. It truly is a festive gift from the government to the nation and the automotive industry. We wholeheartedly applaud the Finance Minister and the GST Council for reducing GST on commercial vehicles—buses and trucks—from 28% to 18%. This will not only reduce logistics costs for the economy, but encourage customers to upgrade their fleets with modern, fuel efficient and safer trucks and buses.

For buses, this will encourage much-needed fleet modernisation by state transport corporations and private operators, strengthening public mobility. For trucks, it will ease cost pressures for fleet operators and stimulate demand in logistics and freight, which are critical for India’s growth momentum. Together with the reduction in GST on auto components, the GST reforms reinforce the government’s commitment to enabling sustainable growth of the auto sector.”

R C BHARGAVA, CHAIRMAN, MARUTI SUZUKI INDIA LIMITED: “Maruti Suzuki congratulates and thanks the Prime Minister, Finance Minister and the GST council for the decisions taken to restructure the GST system. This is a major reform that will give a boost to the entire economy and take the country closer to its goal of a Viksit Bharat. This reform is another step that would empower the people to shape their future themselves. The last budget put a substantial amount of money into their pockets. Borrowing rates have come down due to inflation control and financial prudence. The new GST system will make many items of daily use more affordable. The people will have more purchasing power and that would stimulate more demand and production. The speed of decision making and implementation is also admirable. The automotive industry would be a direct beneficiary of faster economic development. In particular, Maruti Suzuki is grateful for small cars being placed in the 18% GST basket. The 10% lower tax will stimulate a flagging market, and many more people will be able to buy safer and more comfortable means of mobility. The growth of the car industry in general will also benefit from the GST system and we expect the industry growth rate to come back to about 7% a year. Manufacturing growth and employment will both benefit.”

SHENU AGARWAL, MD & CEO, ASHOK LEYLAND: “The GST rate reductions announced by the Hon’ble Finance Minister represent a forward-looking step towards simplifying India’s tax structure and accelerating economic momentum. The shift to a streamlined two-tier system of 5% and 18% will not only ease compliance but also bolster key sectors, uplift consumer sentiment, and reduce the financial burden on the common man. Crucially, this move will help mitigate the impact of the recently imposed US tariffs. The specific relief for the commercial vehicle industry is especially welcome. On one hand, it will spur freight traffic, and on the other, it will bring down the cost of buses and trucks, unleashing demand trajectory for commercial vehicles.”

AJINKYA FIRODIA, VICE CHAIRMAN OF KINETIC INDIA : "Rationalisation of GST is a good idea to remove complexity and bring about uniformity and the right direction for our country. However, there are reports of tax reduction only in smaller capacity vehicles (up to 300 cc) and an increase in above 300 cc. Since the majority of the market, over 2 crore per annum, is already in the lower category, there is no need to create this divide and a mid ground but common tax should be implemented."

"Moreover, we still need to support EVs. EVs, after all these years of subsidy, are finally getting accepted and growing; however, penetration is still in single digits at 9 percent. Hence, we should consider subsidy continuation and enhancement for 5 years clearly, till there is a 40–50 percent shift to the same. For funds, therefore, we needn’t rationalise from 28 to 8 but can instead make a common 15 percent for petrol and enhance subsidy back to Rs. 15,000 per kWh. This will serve all purposes."

DR. ANISH SHAH, GROUP CEO & MD, MAHINDRA GROUP: “The next-generation GST reforms announced today mark a defining moment in India’s journey towards building a simpler, fairer, and more inclusive tax system. By moving to a streamlined two-rate structure and focusing on essentials that touch the lives of every citizen- from food, health, and insurance to agriculture and small businesses -the Government has reaffirmed its commitment to Ease of Living and Ease of Doing Business. The rationalisation measures will not only provide immediate relief to households but also strengthen key sectors such as  automobiles, agriculture, healthcare, renewable energy, and MSMEs - all of which are vital to job creation and sustainable growth. The correction of long-pending inverted duty structures in critical industries is welcome.

At Mahindra, we view these reforms as transformative. They simplify compliance, expand affordability, and energise consumption, while enabling industry to invest with greater confidence. This bold step is in line with the vision articulated by the Hon’ble Prime Minister of building a citizen-centric, future-ready Bharat. It strengthens India’s economic foundations and will help drive the next phase of equitable and inclusive growth- journey towards Viksit Bharat @2047.”

RAJESH JEJURIKAR, ED & CEO -AUTO AND FARM SECTOR, M&M: “We applaud the Government for this landmark GST rationalisation, which will have a far-reaching positive impact across the automotive and farming sectors . The move makes tractors and farm machinery more affordable for farmers, reduces costs for commercial vehicles and improves accessibility for personal mobility through rationalisation of rates across all SUVs. Together, these measures are expected to stimulate demand, and drive inclusive growth across the entire ecosystem.

We also appreciate the continuation of the  5% GST rate on EVs, which is a critical enabler of India’s clean mobility vision. This  measure will further accelerate the adoption of electric vehicles and reinforce India’s leadership in sustainable, green transportation.”

KULDIP SINGH RATHEE, CHAIRMAN AND MANAGING DIRECTOR, ASK AUTOMOTIVE LIMITED: “We welcome the GST announcement by the Ministry of Finance, which is indeed a pre-festival gift for the entire nation. The next-generation two-slab tax structure marks a landmark reform for the Indian economy and will help ease the lives of the common man. We particularly appreciate the measures taken for the automobile sector, especially for small cars and two-wheelers up to the 350cc segment. This will provide much-needed relief to an industry that has been struggling for the last few years. The reduction of GST on entry-level vehicles from 28% to 18%, along with the retention of 5% GST on electric vehicles, will boost sales among first-time buyers and middle-income families, while also promoting new opportunities for personal mobility and last-mile connectivity. Moreover, the uniform 18% rate on auto components will strengthen the entire ecosystem by reducing ownership costs and improving supply chain efficiency. We are confident that this festive season will set new benchmarks for the Indian automobile sector.”

KABIR BHANDARI, MD & CHAIRMAN, PVNA GROUP: "PVNA Group welcomes the GST reform as a catalyst for India’s mobility future. By lowering barriers and simplifying compliance, it enables the industry to invest in new technologies, strengthening automotive supply chains to be more resilient and globally relevant. At PVNA Group, we see this as a defining moment to build a more innovative, inclusive, and future-ready mobility ecosystem. ”

JITIN MAKKAR, SENIOR VICE PRESIDENT AND GROUP HEAD, CORPORATE SECTOR RATINGS, ICRA LIMITED:  “The GST rate cut is a welcome relief for the automobile sector, which has been grappling with sluggish demand (from both domestic and exports) and inventory build-up pressures. Lower tax incidence directly translates into reduced on-road prices, making vehicles more affordable for consumers. This is particularly significant for entry-level cars and two-wheelers, where price sensitivity is high. The move is expected to revive showroom footfalls, accelerate retail sales, and help OEMs clear existing stock. Additionally, it would have a positive spillover effect on ancillary industries such as auto components and financing. The organised auto aftermarket segment, comprising spare parts, components, batteries, tyres, lubricants, repairs etc., will also benefit as the pricing differential with the unorganised segment narrows. While the long-term trends will still hinge on income sentiment and fuel prices, the immediate effect is likely to be a positive uptick in demand, particularly in the entry and the mid-price automobile segments.”

VENKATRAM MAMILLAPALLE, MANAGING DIRECTOR, RENAULT INDIA: “We welcome the GST Council’s decision to rationalize rates into a two-slab structure of 5% and 18%, a landmark reform for the Indian economy. This is indeed an early festive gift from the Government, lifting consumer sentiment, easing household expenses, and strengthening confidence in long-term growth. For the automobile sector, the move is transformative. The GST reduction on the entry level car segment (petrol below 1200 cc and diesel below 1500 cc) from 28% to 18%, and a uniform rate for auto components at 18%, make personal mobility significantly more affordable for the masses. The rationalized GST will ease household expenses, fuel consumption, and create a multiplier effect on long-term economic growth. With reduced taxes on tractors, agri-inputs and farm equipment, the GST reform will boost rural demand, strengthen agri-linked enterprises, and create new growth avenues in semi-urban and rural India. This will unlock fresh demand in Tier 2, Tier 3, and rural markets where improving farm incomes are driving aspirations for car ownership. Renault is well positioned to leverage this shift, and we believe the reform will accelerate rural and urban demand alike, boost manufacturing, and contribute strongly to India’s economic momentum.”

SAKET MEHRA AND SACHIN SHARMA, PARTNER, GRANT THORNTON BHARAT: “The recent GST rationalisation announced by the Council marks a significant turning point for the Indian automotive industry, aimed at simplifying taxation and improving affordability across key segments. One of the most impactful changes is the reduction of GST on small cars from 28% to 18% applicable to petrol, diesel and hybrids within the prescribed limits of 1,200cc & 4 m for petrol and 1,500cc & 4 m for diesel. This move is expected to revive demand in the entry-level segment, which was gradually losing its grip in the Indian PV market (from making up for 31% of total PV sales in FY 2024-2025, to 27% of PV sales (between April- July 2025). The rate cut could significantly lower acquisition costs by up to Rs 1 lakh (accounting for ~12% drop in process) which is expected to revive demand, especially in Tier 2 and Tier 3 cities, with the festive season approaching.

In contrast, midsize and luxury vehicles defined as those exceeding 4 m in length or engine capacities above 1,200cc (petrol) or 1,500cc (diesel) will now attract a GST rate of 40% without the compensation cess. With the expiry of cess ranging from 17-22% on such cars, these vehicles will get cheaper, despite moving to a higher GST rate.

The two-wheeler segment also sees a bifurcation. Motorcycles with engine capacities below 350cc will benefit from a reduced GST rate of 18%, down from 28%, improving affordability for mass-market buyers. However, motorcycles exceeding 350cc—typically in the premium and leisure category -- will attract the highest slab of 40%, which could raise prices for models in the mid- and high-capacity range and slow growth in this aspirational segment.

In a major relief to the supply chain, the Council has introduced a uniform 18% GST rate on auto parts, irrespective of HS codes. This simplification reduces classification disputes and compliance burdens, enabling better cost predictability for OEMs and component suppliers. The rationalisation is expected to lead to cost savings across the value chain, some of which will be passed on to customers through price reductions or enhanced features. For the industry, this translates into improved margins, streamlined operations, and better alignment with global practices.

The GST cut on ambulances and commercial vehicles, including buses and trucks, is another strategic move. Lowering the rate from 28% to 18% will make these vehicles more affordable, especially for small fleet operators and healthcare providers. Ambulance affordability is expected to improve in underserved regions, while commercial vehicle buyers may benefit from up to 10% lower prices, encouraging fleet expansion and investment in logistics and public transport. The relief on tractors and tractor tyres, now taxed at 5%, supports rural mobility and agricultural logistics.

However, the industry will require clarity on transitional issues. Inventory purchased under the old tax regime may become less competitive, leading to working capital pressures, pricing mismatches, and cautious stocking strategies. Dealers are particularly vulnerable during this phase, as they navigate input tax credit mismatches and potential losses on unsold inventory. The Council has acknowledged these concerns and is expected to address them in the coming days to ensure a smoother rollout.

In conclusion, the GST rationalisation represents a bold step toward cost rationalisation and structural simplification across the auto ecosystem. It enhances affordability, improves competitiveness, and sets the stage for sustained growth provided transitional hurdles are managed effectively and industry stakeholders are supported through the change.”

SWAPNESH R MARU, DEPUTY MANAGING DIRECTOR, TOYOTA KIRLOSKAR MOTOR: “We thank and congratulate the Government for the landmark second generation GST reform, a significant step towards accelerating India’s journey to a stronger and more resilient economy. Beyond empowering the common man, this reform is poised to enhance market confidence, strengthen consumer sentiment and stimulate investments — collectively broadening prosperity across the nation. The relief extended to smaller vehicles, along with the rationalization of levies on larger ones, will enhance mobility for the common man by making it more accessible and affordable, while at the same time stimulating growth across the automotive sector.

As a next step , it is essential to reduce fossil fuel imports and achieve our stated national objectives of energy self-reliance, promotion of bio-fuels and decarbonisation. Given India’s rapid economic growth that is bound to increase the demand for energy, particularly fossil fuel consumption by transportation sector, it is crucial that all cleaner and greener technologies are also promoted and incentivised through suitable policy measures, including taxation so that these are preferred by consumers over the conventional petrol and diesel vehicles.”

HEET CHHEDA, CHOICE INSTITUTIONAL EQUITIES: ? The rationalization of GST rates is a huge positive for the automobile sector along with the implementation date of September 22, 2025—the first day of Navratri. This addresses concerns regarding delayed sales with the onset of the festive season.

? The increase of GST on large cars is overall a positive at the 40% rate and the removal of compensation cess (earlier the total tax including cess was 43–50%).

? M&M: A major beneficiary, with all the changes being a positive for the company (Passenger vehicles, Tractors, Commercial vehicles).

? Maruti Suzuki: The change in GST for the small car segment is positive as the company is the largest manufacturer of small cars.

? TVS, Bajaj, Hero: Set to benefit from the GST reduction for 2Ws. TVS and Bajaj will also benefit from the reduction in rate for the 3W segment.

? Eicher Motors: Will benefit from the rate changes for <350 cc motorcycles (~90% of domestic sales), while the rate change to 40% for >350 cc motorcycles (~10% of domestic sales) will be a small negative.

? Ashok Leyland: The reduction in GST for the trucks and bus segment is a positive for the company.

? Auto Ancillaries: Set to benefit overall as lower vehicle tax rates will likely increase vehicle sales and production. This growth will drive higher demand for auto parts and components, positively impacting ancillary companies across the industry.

NISHCHAL CHAUDHARY, FOUNDER – BATTRE ELECTRIC MOBILITY: "We welcome the government’s move to reset the GST. This step will significantly ease working capital stress across industries and particularly for the electric vehicle sector, which has long been operating under an inverted duty structure. By addressing this imbalance to some extent, the GST reset will support EV manufacturers and will also accelerate the transition towards sustainable mobility in India."