Auto Sector Urges GST Cuts Before Festive Sales Begin

28 Aug 2025 CW Team

This follows Prime Minister Narendra Modi’s Independence Day address, where he announced plans for next-generation GST reforms, including potential tax cuts. As a result, buyers are delaying purchases, anticipating that prices of small cars and two-wheelers may fall by up to 8–10 per cent once the revised structure takes effect.

The CEO of a leading carmaker stated that sales have dropped in double-digit percentages since the news of possible GST cuts surfaced. He expressed optimism about a swift resolution, noting that the matter is likely to be prioritised at the upcoming GST Council session.

The Federation of Automobile Dealers Associations (FADA) has formally written to the Ministries of Finance, Commerce, and Heavy Industries, highlighting how speculative delays in purchase decisions could turn the festive season into a "whitewash" period. The body has stressed the need to implement lower GST slabs on small cars before Diwali, arguing that pent-up demand will only materialise after the tax changes come into force.

FADA has also sought clarity on the utilisation of accumulated cess, which is expected to be phased out under the proposed tax reforms.

Renault India’s Managing Director and CEO, Venkatram Mamillapalle, acknowledged that speculation over GST cuts has directly impacted vehicle sales, as many potential customers are deferring their purchases to wait for price reductions. He observed that for those who can afford to wait, postponement seems logical in anticipation of lower vehicle costs.

Currently, small cars are taxed at 28 per cent, while larger cars attract a total levy of 43 to 50 per cent, including cess. Under the proposed reforms, the government plans to simplify the GST structure into two primary slabs—5 per cent for essentials and 18 per cent for most goods, including small cars and two-wheelers under 350cc engine capacity. Meanwhile, luxury vehicles and SUVs are likely to attract a 40 per cent tax under the new structure.

Industry analysts believe the GST rate cut will provide much-needed relief to the small car segment, where prices have surged by 50 to 80 per cent over the last six years, making them increasingly unaffordable for middle-income buyers. The sector now awaits swift government action to mitigate further disruption and ensure festive demand translates into actual sales.

The Indian automobile industry has urged the government to expedite the implementation of revised GST rates ahead of the upcoming festive season, following a sharp decline in sales and customer enquiries. With the GST Council set to meet from 3rd September, automakers and dealers are pushing for the new rates to be rolled out before mid-September to revive consumer sentiment.This follows Prime Minister Narendra Modi’s Independence Day address, where he announced plans for next-generation GST reforms, including potential tax cuts. As a result, buyers are delaying purchases, anticipating that prices of small cars and two-wheelers may fall by up to 8–10 per cent once the revised structure takes effect.The CEO of a leading carmaker stated that sales have dropped in double-digit percentages since the news of possible GST cuts surfaced. He expressed optimism about a swift resolution, noting that the matter is likely to be prioritised at the upcoming GST Council session.The Federation of Automobile Dealers Associations (FADA) has formally written to the Ministries of Finance, Commerce, and Heavy Industries, highlighting how speculative delays in purchase decisions could turn the festive season into a whitewash period. The body has stressed the need to implement lower GST slabs on small cars before Diwali, arguing that pent-up demand will only materialise after the tax changes come into force.FADA has also sought clarity on the utilisation of accumulated cess, which is expected to be phased out under the proposed tax reforms.Renault India’s Managing Director and CEO, Venkatram Mamillapalle, acknowledged that speculation over GST cuts has directly impacted vehicle sales, as many potential customers are deferring their purchases to wait for price reductions. He observed that for those who can afford to wait, postponement seems logical in anticipation of lower vehicle costs.Currently, small cars are taxed at 28 per cent, while larger cars attract a total levy of 43 to 50 per cent, including cess. Under the proposed reforms, the government plans to simplify the GST structure into two primary slabs—5 per cent for essentials and 18 per cent for most goods, including small cars and two-wheelers under 350cc engine capacity. Meanwhile, luxury vehicles and SUVs are likely to attract a 40 per cent tax under the new structure.Industry analysts believe the GST rate cut will provide much-needed relief to the small car segment, where prices have surged by 50 to 80 per cent over the last six years, making them increasingly unaffordable for middle-income buyers. The sector now awaits swift government action to mitigate further disruption and ensure festive demand translates into actual sales.

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