GST cut will reduce prices of Alto, Wagon R: Maruti chief R C Bhargava

Small car market likely to grow by over 10% this year, says R C Bhargava

Maruti Suzuki Chairman R C Bhargava projected a 10 per cent rise in small car sales this financial year after the GST Council decided to slash the tax on passenger vehicles to 18 per cent from 28 per cent, effective from September 22. 

Speaking to Business Standard, Bhargava said: “Small cars sales, which were de-growing, we project now, will grow by 10 per cent this year after the sharp GST cut. Even the tax on bigger cars, which were paying GST plus cess of up to 50 per cent, is now capped at 40 per cent. As a result, we expect the total passenger car market to grow by 6-8 per cent… There is a general feeling of euphoria with interest rates coming down, income tax benefits and now GST (reforms). They together will help consumers to have more money to increase consumption.” 

 

He said the price of Maruti’s Alto could drop by ₹40,000–50,000, while the entry-level Wagon R may see reductions between ₹60,000 and ₹67,000. Company officials are still working out the details. 

The outlook marks a reversal at a time when passenger vehicle growth has slowed; it was just 1 per cent in FY25. Industry forecasts had pointed to only 1–4 per cent expansion this financial year, with compact cars and hatchbacks registering a 13 per cent decline in FY25. 

Bhargava said the GST cut will also benefit larger and luxury cars with engines above 1,200cc and longer than four meters. “The GST reduction will help larger and high-end cars, too. That is because earlier they used to pay 28 per cent and a cess — which effectively increased the GST pay out to 43 per cent–50 per cent. Now the cess has been removed and for sin and super luxury goods, the duty has been capped at 40 per cent. So a car priced at ₹1 crore, my estimation is, will see price fall by ₹5 lakh.”

 

For hybrids, however, the benefit will be limited. Bhargava said hybrid cars with engines over 1,500cc and longer than four meters will now pay 40 per cent tax compared with 43 per cent earlier, noting the change is not very meaningful for the company.

 

He added that car prices may reduce by 9 per cent rather than 10 per cent, since the GST Council’s decision doesn’t account for automakers’ transportation costs and dealer margins.

 

An S&P Global report estimated that for internal combustion and hybrid vehicles, entry-level hatchbacks like the Wagon R, premium hatchbacks like the Swift, compact sedans such as the Dzire and subcompact SUVs with petrol engines below 1,200cc will see prices fall by 8.5 per cent. The prices of large sedans like the Virtus, compact SUVs such as the Brezza, and mid-sized SUVs like the Creta and Ertiga could decline 3.5 per cent. Premium SUVs including the XUV700 and MUVs like the Innova may see price cuts of about 6.7 per cent.