Lower GST rate to benefit auto sector, boost domestic sales: Crisil

New Delhi [India], September 4 (ANI): Lower GST on automobiles is set to make vehicles more affordable for buyers and create new opportunities for sellers. As per a Crisil Intelligence report, the revised GST slab to 18 per cent from 28 per cent will benefit the auto sector and boost domestic sales.

“The automotive aftermarket segment will also benefit as all components will now be brought under the 18 per cent GST slab, thereby leading to a reduction in prices of components taxed at 28 per cent by about 7.8 per cent,” the report said.

GST 2.0 will allow customers to purchase internal combustion engine (ICE) vehicles at lower rates, thereby improving affordability. Sellers are also likely to benefit from increased demand and stronger sales volumes. At the same time, the government has retained the 5 per cent GST rate on electric vehicles (EVs), ensuring that cleaner mobility options remain attractive to buyers and aligned with India’s green goals.

The report highlighted that the prices of entry-level hatchbacks, such as Wagon R, premium hatchbacks like Swift, compact sedans including Swift Dzire, and sub-compact SUVs, such as Punch, are expected to fall by nearly 8.5 per cent.

Large sedans like Virtus, compact SUVs such as Brezza, mid-SUVs like Creta, and MPVs such as Ertiga are projected to be cheaper by about 3.5 per cent. Meanwhile, premium SUVs, including the XUV 700 and MPVs with bigger engines like the Innova, may see a decline of about 6.7 per cent.

Two-wheelers are also set to become more affordable. Prices of most ICE two-wheelers will drop by nearly 7.8 per cent, though premium bikes with engines above 350 cc could become costlier by 6.9 per cent.

In the farm sector, ICE tractors and fuel cell motor vehicles, including hydrogen-powered models, are likely to see price reductions of about 6.3 per cent. Three-wheelers, light commercial vehicles (LCVs), medium and heavy commercial vehicles (MHCVs), and buses will all record a decline of nearly 7.8 per cent.

The report suggests that from a domestic sales outlook, passenger vehicles may see a slight rise in fiscal 2026, while two-wheelers are expected to grow at a higher single-digit pace. Tractor sales are projected to expand 4-7 per cent, and commercial vehicles could post marginal-to-flat growth.

Logistics and transport operators are also likely to gain from the reforms. The GST on multimodal logistics has been reduced to 5 per cent from 12 per cent, lowering costs, especially for exporters. “The reduction in third-party insurance on goods carriages from 12 per cent to 5 per cent will also lead to a decline in operating costs for transporters,” the report stated.

Small fleet operators will not be impacted, while large operators will now pay 18 per cent GST with input tax credit instead of 12 per cent earlier. In the short term, their input credits may face delays until the system stabilises, but the long-term benefits remain significant. (ANI)

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