E-Paper
Maruti Suzuki, Tata Motors, M&M power auto stocks to 11-month high after GST 2.0
India has reduced the GST rate on small cars to 18% from 28%, in boost to Maruti Suzuki and Tata Motors. Even M&M stands to gain from a lower 40% GST.
A gauge of India's auto stocks, which includes Maruti Suzuki India Ltd., Tata Motors Ltd. and Mahindra & Mahindra Ltd., jumped to the highest level in nearly 11 months after the government slashed GST on cars.
Auto shares were the top sectoral gainers on the benchmark Nifty 50 index, which was trading 0.7% higher.
On Wednesday, the GST Council approved lower taxes on hundreds of items—from soaps to small cars—to spur domestic demand in the face of steep US tariffs. The GST on small cars has been reduced to 18% from 28%.
Most stocks on the auto index were trading in the green, with M&M and Eicher Motors Ltd. leading gains. The stocks were up 7.4% and 3.1%, respectively.
GST on small cars
The GST Council has reduced the GST rate on small cars—less than four metres in length with petrol engines up to 1,200 cc and diesel engines up to 1,500 cc—to 18% from 28% at present. Any bigger or more powerful will attract 40% GST.
That's set to boost the country's largest carmaker Maruti Suzuki India Ltd. and its breadwinner small cars, as well as rivals Hyundai Motor India Ltd., Tata Motors Ltd. and Mahindra & Mahindra Ltd. to some degree.
"The rationalisation of GST rates on vehicles and auto components is a truly welcome and significant development," Saurav Agarwal, partner and auto tax leader at EY, told Hindustan Times. “By making vehicles more affordable across all segments, this move will not only boost consumer spending but also simplify complex classification disputes that have long burdened the automotive industry.”
“The discontinuance of the cess is a particularly pragmatic step, which will provide much-needed support to a sector that is a vital contributor to our nation's GDP.”
