Revamped GST Slab Drives Down Auto Prices, Boosts Sales Outlook

The Indian automotive sector is poised for a major transformation following the government's decision to lower the Goods and Services Tax (GST) rate from 28% to 18% on automobiles. The move is expected to make vehicles more affordable and stimulate domestic sales, according to a report by Crisil Intelligence.

The report highlights that internal combustion engine (ICE) vehicles will become more economically viable for consumers. Entry-level hatchbacks such as the Wagon R, premium hatchbacks like the Swift, and even sub-compact SUVs including the Punch are expected to see price reductions of nearly 8.5%. The government, however, has maintained the GST rate for electric vehicles at 5%, ensuring that green mobility options remain appealing.

In addition to cars, the GST cut will significantly slash prices in the automotive aftermarket as components previously taxed at 28% will now fall under the 18% slab. Other sectors, including two-wheelers, tractors, and commercial vehicles, are also set to benefit from a price reduction ranging from 6.3% to 7.8%. The logistics and transport sectors will see a drop in costs due to reduced GST on multimodal logistics and third-party insurance. However, large operators might experience some initial hiccups with input tax credits.

(With inputs from agencies.)