The Indian automobile industry may soon get a major boost as reports suggest that the Goods and Services Tax (GST) on small cars could be slashed from the current 28% to 18%. If approved, this decision is expected to make small cars significantly more affordable, benefiting both consumers and the auto sector.
Why the GST Cut Matters
At present, small cars are placed under the highest GST slab of 28%, which puts them in the same tax category as luxury vehicles and SUVs. This has often been criticized by automakers, as small cars are generally purchased by middle-class families who are price-sensitive.
Reducing GST to 18% will not only bring down the on-road prices but also:
- Boost demand in the small car segment
- Encourage first-time buyers to purchase cars
- Support automakers struggling with slow sales
- Revive the overall automobile sector
biggest beneficiaries companies
1. Maruti Suzuki India Ltd. (Biggest Beneficiary)
- Maruti Suzuki sells the largest number of small cars in India, with models like Alto K10, S-Presso, WagonR, Swift, Baleno, Celerio, Dzire.
- Nearly 60–65% of Maruti’s sales come from small cars and compact hatchbacks.
- Price cuts of ₹50,000–₹70,000 on these cars would make them even more attractive to middle-class buyers.
👉 Maruti Suzuki will benefit the most.
2. Hyundai Motor India
- Hyundai’s Grand i10 Nios, Aura, and i20 are strong players in the compact car space.
- A price cut will improve affordability, especially for budget-conscious urban buyers.
- Hyundai could capture more sales from buyers upgrading from two-wheelers.
3. Tata Motors
- Tata’s small cars like Tiago, Tigor, Punch, and Altroz fall in this category.
- A GST reduction would strengthen Tata’s sales momentum, especially since Punch is already a top-seller.
- It also helps Tata position itself more competitively against Maruti and Hyundai.
4. Renault & Nissan
- Renault Kwid and Triber, along with Nissan Magnite, will also see higher demand if prices drop.
- These brands rely heavily on affordability, so lower GST directly boosts their sales potential.
5. Honda (to a smaller extent)
- Honda’s Amaze sedan falls in the small-car category, so it may benefit too.
- But since Honda has exited the hatchback space in India, its gains will be limited compared to Maruti, Hyundai, and Tata.
Impact on Consumers
If the GST cut is implemented, the price of popular hatchbacks and entry-level sedans could drop by several thousand rupees. For example, a small car priced at ₹6 lakh (ex-showroom) may see a price reduction of ₹50,000–₹70,000, depending on the model and state taxes.
This would be a huge relief for middle-class families, students, and young professionals looking for budget-friendly personal mobility options.
Impact on the Auto Industry
India’s auto industry has been facing challenges such as rising input costs, electric vehicle transition, and fluctuating demand. Lower taxes on small cars would encourage higher sales volumes, allowing manufacturers to achieve better economies of scale.
Additionally, increased demand could also support ancillary industries such as auto parts, dealerships, and financing companies.
Government’s Perspective
While the government earns significant revenue from automobile taxation, lowering GST on small cars may be seen as a long-term investment to revive the sector. The move aligns with the larger goal of promoting affordable mobility and supporting the “Make in India” initiative.
Final Thoughts
If the GST on small cars is reduced from 28% to 18%, it could be a game-changer for the Indian automobile industry. The move will not only help millions of middle-class buyers but also give a much-needed push to the country’s auto market.
As discussions progress, buyers may want to wait and watch before finalizing their car purchase, as prices could fall significantly in the coming months.