GST 2.0 boosts demand and affordability in auto industry; spurs fresh investments
A year after the implementation of GST 2.0, auto industry executives in India, from companies like Tata Motors, Hyundai, Mahindra, and Maruti Suzuki, said the revised tax regime has improved vehicle affordability and strengthened consumer confidence. They also believe that the GST 2.0 provided a significant boost to customer demand across segments.
The GST Council had approved changes to the tax structure that became effective from September 22 last year. Under the revised tax structure, petrol, LPG and CNG vehicles with engine capacity of less than 1,200 cc and not more than 4,000 mm length and diesel vehicles powered by engines of up to 1,500 cc and measuring up to 4,000 mm length, moved to the 18% rate slab from 28%. The tax rationalisation has been credited with supporting demand across various segments of the automobile industry.
PTI reported that the top auto industry executives in India believe that the new tax regime has helped broaden the customer base, particularly by improving affordability in the entry-level market, while the resulting demand momentum is encouraging automakers to accelerate capital expenditure and expand capacity. Interestingly, the entry-level car segment in India that was witnessing shrinking sales before GST 2.0, witnessed a strong comeback in consumer demand and sales numbers.
Tata Motors Passenger Vehicles Ltd. MD and CEO Shailesh Chandra said GST 2.0 had provided a significant stimulus to the nation's economy by improving affordability and energising consumer demand. "The momentum we have built over the past year reinforces our belief that progressive policy, greater accessibility, and desirable products can together expand the market and bring new-age mobility within reach of many more Indians," he reportedly said.
Hyundai Motor India Ltd. MD and CEO Tarun Garg said the GST 2.0 reforms have been a significant catalyst for the Indian automotive industry, driving enhanced market accessibility and stronger consumer confidence. "The passenger vehicle industry has recorded a year-on-year growth of 15% plus during September 2025-March 2026 and 29% plus during April-August FY2026-27, clearly demonstrating the strong impact of these reforms," Garg said, while adding that GST 2.0 reforms have enhanced affordability and accessibility for customers.
Mahindra Group CEO and MD Anish Shah said the benefits of GST rationalisation were visible across the group's businesses, with higher demand also prompting further investments to increase capacity. "Over the past year, businesses at the Mahindra Group have seen a significant positive impact. Since the GST rationalisation, SUVs have grown 17%, while LCVs and tractors have grown 20%," he stated. Shah also said this momentum reflects the role that tax rationalisation can play in improving affordability and supporting demand across both urban and rural India.
Maruti Suzuki India Ltd. MD and CEO Hisashi Takeuchi said the reform had given fresh impetus to India's growth journey, with the company witnessing particularly strong growth in its entry segment. "At Maruti Suzuki, passenger vehicle sales grew about 36% year-on-year during Apr-Aug'26. We are particularly encouraged by the entry segment's growth of over 96%, where improved affordability has brought mobility closer to many more people," he said.
Both Mahindra and Maruti Suzuki said that, encouraged by the revised tax structure, customer demand and growth revival, the companies have started accelerating their capex plans.
