Could GST Reforms Lower Vehicle Prices by Up to 8.5%?
Click to start listening
Synopsis
Exciting news for car buyers! A recent report suggests that upcoming GST reforms could lead to a significant decrease in vehicle prices, making new cars more affordable. With potential reductions reaching up to 8.5%, now is the perfect time to consider a purchase. Read on to find out how these changes will impact various vehicle categories.
Key Takeaways
- Potential price reductions of up to 8.5% on vehicles.
- New GST slabs: 5%, 18%, and 40%.
- ICE two-wheelers may see reductions, with some exceptions.
- Electric vehicles remain at 5% tax rate.
- Automotive aftermarket components also benefited from the GST changes.
New Delhi, Sep 4 (NationPress) The government's initiative to overhaul the Goods and Services Tax (GST) framework, now featuring three tiers of 5%, 18%, and 40%, is poised to significantly benefit both the automotive sector and consumers. A report released on Thursday indicates that vehicle prices across various categories could decrease by as much as 8.5%.
Specifically, for internal combustion engine (ICE) and hybrid vehicles, the cost of entry-level hatchbacks, premium hatchbacks, compact sedans, and sub-compact sport utility vehicles (SUVs) with engines under 1,200 cc petrol or 1,500 cc diesel is expected to drop by approximately 8.5%, as noted by Crisil Intelligence.
Additionally, prices for larger sedans, compact SUVs, mid-SUVs, and multi-purpose vehicles (MPVs) with engines under 1,500 cc will see a reduction of about 3.5%.
Premium SUVs and MPVs featuring engines over 1,500 cc are likely to experience a price decline of around 6.7%.
For ICE two-wheelers, nearly all categories, with one exception, will undergo a price reduction of about 7.8%.
However, prices for premium two-wheelers with engines exceeding 350 cc may increase by approximately 6.9%, according to the report.
ICE tractors and fuel cell motor vehicles, including hydrogen models, will see a price drop of about 6.3%.
Moreover, the report indicates that three-wheelers, LCVs, MHCVs, and buses will enjoy a price reduction of around 7.8%.
This analysis does not factor in any potential pass-through effects from automotive component manufacturers to original equipment manufacturers (OEMs) due to GST reductions, as all automotive components now fall under the 18% GST bracket.
From a domestic sales angle, by fiscal 2026, passenger vehicles (PVs) are projected to experience a slight uplift in sales (lower single-digit growth), while two-wheelers could see a stronger single-digit growth.
Tractors are anticipated to maintain a positive trajectory with growth rates between 4-7%, while commercial vehicles (CVs) may show flat to marginally positive growth.
Electric vehicles will retain their tax rate of 5%, while other segments have undergone revisions to 18% or 40%.
The automotive aftermarket will also reap benefits as all components are now categorized under the 18% GST slab, leading to a potential price reduction of components previously taxed at 28% by approximately 7.8%, as stated in the report.
Point of View
I acknowledge the transformative impact of the government's GST reforms on the automobile industry. This strategic overhaul not only aims to enhance affordability for consumers but also to stimulate growth within the sector. By considering the varied implications across different vehicle categories, we can appreciate the holistic benefits these changes bring to the market. It’s a pivotal moment for both manufacturers and buyers, and we at Nation will keep you updated with the latest developments.
NationPress
04/09/2025
Frequently Asked Questions
How much can vehicle prices decrease due to GST reforms?
Vehicle prices may decrease by up to 8.5% across various segments as a result of the new GST structure.
What are the new GST slabs introduced?
The new GST structure consists of three slabs: 5%, 18%, and 40%.
Will electric vehicle prices change?
Electric vehicles will continue to be taxed at the lower rate of 5%, remaining unchanged.
What impact will the reforms have on two-wheelers?
Prices of nearly all two-wheelers are expected to reduce by about 7.8%, except for premium models with engines over 350 cc.
How will the automotive aftermarket be affected?
The automotive aftermarket is set to benefit as all components will be taxed at 18%, leading to a reduction in prices of previously higher-taxed components.
