Potential GST revisions could drive vehicle costs down by as much as 8.5%, according to a recent report.
The Indian government has announced a revamp of the Goods and Services Tax (GST) structure, aiming to benefit the automobile industry and customers alike. According to a report by Crisil Intelligence, prices across various segments of the industry could decrease up to 8.5%, as per Zee News.
For internal combustion engine (ICE) and hybrid vehicles, entry-level hatchbacks, premium hatchbacks, compact sedans, and sub-compact SUVs with engines less than 1,200 cc petrol or 1,500 cc diesel will see a price decrease of approximately 8.5%. Similarly, prices of three-wheelers, LCVs, MHCVs, and buses will decrease approximately 7.8%. Tractors are expected to continue with 4-7% growth in fiscal 2026, while CVs may see flattish-to-marginal-positive growth.
The tax rate for other segments in the automobile industry has been revised to either 18% or 40%. This includes premium SUVs and MPVs with engines over 1,500 cc, which will fall about 6.7%, and large sedans, compact SUVs, mid-SUVs, and multi-purpose vehicles (MPVs) below 1,500 cc, which will decrease by about 3.5%.
Interestingly, the report does not specify the growth rate for the electric vehicles segment in fiscal 2026. However, electric vehicles will continue to be taxed at 5%, providing a significant advantage over other segments that face increases to 18% or 40%. The manufacturer of electric vehicles that could particularly benefit from this GST restructuring is not explicitly named in the provided search results.
In the case of ICE tractors and fuel cell motor vehicles, including hydrogen vehicles, prices will decline by about 6.3%. In the case of ICE two-wheelers, prices of almost all categories, except premium two-wheelers with over 350 cc engine, will decrease by about 7.8%. Contrarily, prices of premium two-wheelers with over 350 cc engine will increase about 6.9%.
Two-wheelers could see higher single-digit growth in fiscal 2026, while the growth for PVs is expected to be a marginal uptick (lower single-digit growth). It's worth noting that the automotive component manufacturers' GST reduction pass-through to original equipment manufacturers (OEMs) is not considered in the analysis across segments.
This GST revamp is expected to bring a breath of fresh air to the automobile industry, potentially leading to more affordable vehicles for consumers and promoting growth in various segments.
