GST cuts fuel festive demand: Cars, bikes and gadgets set for sales boom

Electronics and auto makers raise output after GST cuts, expecting higher festive sales as small cars, two-wheelers, TVs and ACs turn cheaper from September 22

As India heads into the festive season, car makers, two-wheeler companies, and consumer electronics manufacturers are preparing for a sharp jump in demand. Many firms are ramping up production, some by nearly a quarter, after the Goods and Services Tax (GST) Council announced steep tax cuts on small cars, motorcycles, televisions, and household appliances, according to a report by The Economic Times. 

Companies are betting that buyers who held back on purchases will now rush to showrooms and stores from late September, just in time for festivals that run through the year-end.

 

Auto companies revise plans

The automobile industry is among the biggest beneficiaries of the new GST structure. Small cars will now attract 18 per cent tax instead of the earlier 29-31 per cent, while motorcycles below 350cc will also be taxed at 18 per cent compared to 28 per cent earlier. Larger utility vehicles and luxury cars will see their tax rate trimmed to 40 per cent from 43-50 per cent. 

 

With these cuts, manufacturers such as Maruti Suzuki, Hyundai, Tata Motors, and Mahindra & Mahindra are reworking production schedules. The Economic Times quoted industry executives saying that retail sales of passenger vehicles are expected to remain strong for at least four to six weeks once the new rates are enforced. While dispatches to dealerships slowed in August to avoid transitional losses, companies expect to recover quickly.     

    Maruti Suzuki, for instance, reduced production by 6 per cent last month but still holds over 150,000 pending orders from customers who delayed deliveries in anticipation of lower prices. The company’s chairman, RC Bhargava, said the cuts will help revive small car sales, estimating annual growth of 10 per cent for the segment and 7-8 per cent for the broader auto industry, the news report said.

 

Electronics makers eye larger market

The consumer electronics industry also stands to gain. Televisions, air conditioners, monitors, dishwashers, and projectors now attract 18 per cent GST instead of 28 per cent. 

Dixon Technologies, India’s largest local electronics contract manufacturer, is preparing for a surge in orders. Chairman Sunil Vachani pointed out that penetration of products like ACs and large TVs in Indian households remains low at 12–20 per cent, leaving significant room for expansion, the news report said.     

 

GST revamp: What becomes cheaper

The GST Council’s decision goes beyond cars and electronics. Essential daily-use products have seen sharp reductions:

• Hair oil, soaps, toothpaste, and shaving cream now face a 5 per cent tax instead of 18 per cent

• Dairy items such as butter, ghee, cheese, and spreads drop from 12 per cent to 5 per cent

• Staples like paneer, chapati, paratha, and UHT milk have moved to the nil tax category

• Life-saving medicines remain exempt

 

What becomes costlier

At the same time, higher taxes have been imposed on select items considered non-essential or harmful. Rates on pan masala, aerated drinks, caffeinated beverages, and most tobacco products have been raised from 28 per cent to 40 per cent. 

 

A structural reform

Union Finance Minister Nirmala Sitharaman called the move more than just a rate cut, describing it as a “structural reform” designed to simplify compliance and boost consumption. The new two-slab system eliminates the earlier 12 per cent and 28 per cent rates, leaving a streamlined structure that industry leaders hope will fuel demand during India’s busiest shopping season.