GST Cut to Boost Two-Wheeler & Car Demand This Festive Season

Post by : Armust Desk

India’s automobile sector is expected to see a rise in demand for two-wheelers and passenger vehicles (PVs) following the Goods and Services Tax (GST) Council’s decision to simplify and reduce GST rates. Two-wheelers and PVs, which together make up 90 per cent of the country’s vehicle market, are predicted to see demand increase by 200 basis points (bps) and 100 bps, respectively, according to recent industry insights.

Expected Sales Growth

• Two-wheelers: Sales volume is projected to grow by 5-6 per cent this fiscal year.

• Passenger vehicles (PVs): Sales may rise by 2-3 per cent.

Experts say this growth will be supported by the GST reduction, festive demand, and improved affordability of vehicles.

GST Changes and Benefits

The GST Council has introduced a two-rate structure, effective September 22:

• 5 per cent for certain items like tractors.

• 18 per cent for small PVs, two-wheelers up to 350 cc, commercial vehicles (CVs), and three-wheelers.

This new system will:

• Simplify compliance for businesses.

• Reduce logistics costs with smoother interstate taxation.

• Improve profitability for automakers across the supply chain.

With the GST cut passed fully to consumers, vehicle prices are expected to drop:

• Small passenger vehicles: Rs 30,000–60,000 lower.

• Two-wheelers: Rs 3,000–7,000 lower.

Impact on Different Vehicles

• Small PVs and two-wheelers up to 350 cc: GST reduced from 28% to 18%.

• Mid and large PVs: Prices cut by 3-7%.

• Tractors: Rates reduced to 5% and 18% from 12% and 28%.

• Commercial vehicles (CVs): Lower GST will offset the cost rise due to mandatory AC cabins from October 1, 2025.

However, motorcycles above 350 cc will face a higher GST: a 40% special rate compared to the previous 31%, making them more expensive.

Festive Season Boost

The timing of the GST rate reduction coincides with Navratri and the festive season, which is expected to improve consumer sentiment. Combined with:

• New vehicle launches

• Softer interest rates

• Better affordability

This should give a strong boost to the second half of the year for the automobile sector.

Positive Effects on Automakers

Higher vehicle demand is expected to:

• Improve capacity utilisation

• Increase operating leverage

• Generate stronger cash flows

• Improve profit margins

These factors are likely to strengthen the financial position and stability of automakers in the Indian market.

The new GST rates provide a timely opportunity for both consumers and the automobile industry. Lower prices, festive demand, and simplified taxation are expected to revive sales in two-wheelers and passenger vehicles. At the same time, automakers are likely to enjoy better profitability and improved cash flow, making this GST reform a significant positive step for India’s automobile sector.

GST rates, two-wheeler demand, car sales, automobile sector, festive season