The Indian auto industry is pressing the government to fast-track the new GST rate cuts, as car and two-wheeler buyers delay purchases in anticipation of lower prices before the festive season.
The Indian automobile industry is facing a sudden slowdown in sales as customers delay new vehicle purchases in anticipation of the upcoming Goods and Services Tax (GST) rate cuts. Industry leaders and dealer bodies are urging the government to implement the new tax slabs quickly, preferably before the festive season begins in September. With the GST Council scheduled to meet in early September, stakeholders are hoping for clarity soon.
The slowdown in sales began soon after Prime Minister Narendra Modi announced GST reforms during his Independence Day speech. Buyers are expecting small cars and two-wheelers to become cheaper by up to 8 to 10 percent once the revised GST rates are rolled out. This anticipation has led to a significant dip in enquiries and bookings across dealerships.
A leading car company CEO highlighted the urgency of the matter, stating that sales have dropped in double-digit figures since discussions about GST cuts began. He expressed confidence that the GST Council’s upcoming meeting, led by Finance Minister Nirmala Sitharaman, would bring clarity. The two-day meeting starting September 3 is expected to finalise the rollout timeline.
The Federation of Automobile Dealers Association (FADA) has also written to multiple ministries, including Finance, Commerce, and Heavy Industries, to push for faster implementation. In its letter, the body emphasized that consumer deferments could damage festive season sales, traditionally the strongest period for the industry. FADA warned that if the rate cut is delayed until after Diwali, pent-up demand may not be fully realised, turning the season into a missed opportunity.
Venkatram Mamillapalle, Managing Director and CEO of Renault India, echoed these concerns. He noted that speculation around GST reduction has directly impacted sales as customers prefer to wait for potential price drops. The gap between announcement and implementation, according to him, is hurting dealerships that rely on consistent monthly sales. He stressed that customers are convinced prices will fall and those who can delay are doing so.
If implemented, the GST rationalisation could make small cars more affordable. Currently, small cars attract a 28 percent tax, while large cars and SUVs face rates between 43 and 50 percent, including cess. Under the proposed system, small cars and two-wheelers with engine sizes below 350cc may fall under a flat 18 percent bracket. Luxury cars and high-end SUVs, on the other hand, could be taxed at around 40 percent.
The reforms are part of the government’s broader plan to simplify GST by moving from four slabs to a two-rate system: 5 percent for essentials and 18 percent for most goods. This change is expected to streamline taxation and reduce confusion for both businesses and consumers.
For the auto sector, the timing of implementation is critical. Car prices, especially in the small car segment, have risen by nearly 50 to 80 percent over the past six years, pushing many potential buyers out of the market. A tax cut could provide much-needed relief, making entry-level cars affordable again and boosting demand in the mass market.
Dealers are particularly anxious because festive months usually account for a large share of annual sales. Customers tend to make big-ticket purchases like cars and bikes during this period due to favorable sentiment, attractive financing offers, and seasonal discounts. If GST cuts are introduced after Diwali, the industry fears that consumer enthusiasm may not convert into actual sales.
Industry experts believe that the reforms will act as a catalyst for growth, not only benefiting consumers but also supporting manufacturers, dealers, and the overall economy. They argue that the auto sector, which contributes significantly to India’s GDP and employment, needs urgent support to recover from sluggish demand.
The ball now lies in the government’s court, with expectations running high that the GST Council will announce a clear timeline soon. Should the new rates take effect before the festive season, the auto industry could witness a revival in sales, bringing relief to manufacturers and dealers alike. However, any delay may prolong the uncertainty, keeping both buyers and sellers on edge.
In the coming weeks, clarity on GST reform will decide whether the Indian automobile market experiences a festive boom or continues to struggle with subdued demand. For now, buyers are holding back, waiting for the price drop that could change the dynamics of the industry.
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