Auto firms split over GST rejig impact on car and two-wheeler sales

Maruti Suzuki India Chairman R C Bhargava said that GST on cars is currently 28 per cent, with a cess on larger cars pushing the total burden to 40-45 per cent

With the Group of Ministers clearing a new goods and services tax (GST) regime of 5 and 18 per cent, scrapping the 12 and 28 per cent slabs, automotive companies are split on its immediate impact. Many fear buyers may defer purchases of cars and two-wheelers until the GST Council gives final approval, which could hand them a bonanza.

 

Maruti Suzuki India Chairman R C Bhargava (pictured) said that GST on cars is currently 28 per cent, with a cess on larger cars pushing the total burden to 40–45 per cent. “Now with only two slabs, GST logically comes down to 18 per cent. But it’s unclear if the cess will stay for bigger cars. If removed, GST on small and large cars would be the same. At present, discounts are strong, so people are still buying despite the GST buzz. It’s too early to say whether sales will really be hit by purchase deferments,” he said.

 

Bhargava said he hoped the GST Council would take a final decision quickly to avoid prolonged uncertainty. For Maruti, a cut from 28 per cent to 18 per cent on small cars could revive demand in a segment that has been shrinking. But experts caution that if the cess on bigger cars goes, the appeal of small cars over larger ones would diminish. Still, many believe the shift will lift overall sector volumes.

 

The two-wheeler industry remains divided. A senior Bajaj Auto executive said they have not noticed any sign of 

customers delaying purchases, despite the Prime Minister’s August 15 announcement of lower GST.

 

A rival executive disagreed: “We are seeing queries about cancellations. Unless a final decision is taken soon, August and September sales could be hit. It’s logical for buyers to wait and watch.”

 

Currently, internal combustion engine (ICE) two-wheelers above 350 cc attract 28 per cent GST, while electric vehicles face 5 per cent. With an 18 per cent cap, the hope is ICE two-wheelers too will fall to that rate. Several companies are preparing to push the industry body to urge the government not to delay until Diwali but clear the changes quickly, to avoid a September slowdown.