Mumbai: Automobile sales, especially small cars and entry-level two-wheelers, may see weaker demand this festive season as buyers wait for clarity on the government’s proposed Goods and Services Tax (GST) restructuring. The festive season begins later this month with Onam and Ganesh Chaturthi, but industry experts fear consumers may delay purchases due to uncertainty over new tax rates.
At present, all internal combustion engine vehicles, including passenger cars, two-wheelers, three-wheelers and commercial vehicles, attract 28 percent GST. Electric vehicles are taxed at 5 percent, while hydrogen fuel cell vehicles fall under the 12 percent slab. Along with GST, a compensation cess of up to 22 percent is also applicable depending on the vehicle type.
The Centre is now considering GST rationalisation by removing the 12 percent and 28 percent slabs, retaining only 5 percent and 18 percent. Mass-market vehicles are expected to shift to the 18 percent bracket, while luxury vehicles may move into a new 40 percent category. A reduction from 28 percent to 18 percent would lower ex-showroom and on-road prices, but with no official timeline announced, many customers are postponing purchases.
Experts say government should clarify soon to avoid festive season blues. Gaurav Vangaal, Associate Director at S&P Global Mobility, said clarity may come from the upcoming GST Council and Group of Ministers meeting and that will help minimize the damage.
The concern comes at a time when the auto sector is already reeling under subdued demand. According to SIAM data, passenger vehicle sales were down 0.7% YoY to 13,13,133 units in April-July FY26 and two-wheeler sales were down 2.9% to 62,41,829 units during the same period.
Maruti Suzuki India’s Senior Executive Officer for Corporate Affairs, Rahul Bharti said the first quarter was weak but the company is looking at the festive season with hope, backed by good monsoon and rural demand. Hero MotoCorp’s Acting CEO Vikram Kasbekar said low inflation, RBI rate cuts and good monsoon will boost overall demand and two-wheeler sales may bounce back strongly during the festive season.
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Source: Moneycontrol
News Desk
