GST 2.0: New tax reforms and festive incentives expected to increase the small car market in India

The GST 2.0, which is the most important tax review that has been taking place in India over the past few years, eventually joined from 22 September. With this move, the Indian automotive industry, especially the passenger vehicle segment, expects a major review in the consumer sentiment and sales graphs. The small cars at entry level that have always remained the backbone of the Indian passenger vehicle market and had a market share of about 74% in FY18, but have recently seen that the stake shrinks to about 22% in FY25 due to several factors. While the rise of SUVs pushed the hatchback at the back, the affordability crisis also played an important role. With the GST 2.0 tax sheets announced earlier this month, which was linked from 22 September, accompanied by the festive seasonal offers, the segment began to show signs of recovery as there was an increase in the number of consumer discussions. Interestingly, with the new GST tariffs coming into effect, the prices of the small cars begin for the first time in nearly five years at less than £ 4 Lakh. This increases the hope of a turnaround in the affordable segment of the Indian passenger vehicle market after a slump in the last few years. GST 2.0: New tax structure benefits small cars. The new tax structure under GST 2.0 benefits the small cars most among all passenger vehicles. The revised tax structure recommends 18% GST on small cars, lower than the 28% rate previously taxed. The small cars are defined by the engine size and length under the new tax regime. The small cars define the passenger vehicles with the engine capacity of up to 1200 cc for petrol models and up to 1500 cc for diesel. The small cars are also defined by the size of the vehicles. Under this new tax structure, the cars with a length of up to 4000 mm have a GST of 18%. In addition to reducing 10% GST, the government also abolished the 1-3% compensation. With this review, the total tax appearance on small cars dropped significantly. GST 2.0: Car manufacturers have lowered motor prices. The cars in the country have already announced price cuts for their respective cars, following the announcement of GST rate cuts. With this, the car manufacturers passed on the benefits of the GST rate reduction to consumers. Coincidentally, the GST rate cut comes at a time at which the festive season begins. Along with the price cuts caused by the GST rate review, the car manufacturers also announced festive offers, which are expected to further increase the demand and sales of the cars in India, especially to revive the sales of small cars.