Festival's early arrival: Reduced GST leads to reduced costs for hatchbacks
The Indian passenger vehicle market is set for a revival, as the government announces a reduction in the Goods and Services Tax (GST) on small cars. This move, set to commence on September 22, is expected to lead to a significant decrease in ex-showroom prices, by as much as 12-12.5%.
Small cars have traditionally played a significant role in the Indian market, and this reduction in GST is a response to the demands of carmakers who have long advocated for a more favourable tax structure for these vehicles. The restructured GST regime will apply to cars powered by engines and with a length within the benefitting threshold, which is less than 4 meters.
The decline in small car sales over the last few years has been attributed to multiple factors, including affordability issues, economic uncertainties, geopolitical tensions, low income growth, and inflationary pressures. However, with the new GST rates, the situation is expected to change.
For instance, if a small car currently retails at ₹500,000, its price is expected to decrease by ₹62,500 after September 22. This price reduction is expected to benefit not only the auto manufacturers, such as Maruti Suzuki, Hyundai, and Tata Motors, but also customers, especially those in the entry-level segment and first-time buyers seeking smaller passenger vehicles.
Popular models that will benefit from the new GST rate include the Alto K10, S-Presso, WagonR, Swift, Dzire, Grand i10 Nios, i20, Tiago, Tigor, and many more. The improved GST regulation will also boost demand for small cars, potentially leading to a sales surge after a prolonged sluggish pace of sales.
The GST regime is expected to not only provide a fillip to the small car segment but also to the overall Indian passenger vehicle market, which has traditionally been dominated by small cars. With this move, along with the festive season-induced upbeat consumer sentiment, the automakers are poised for a period of growth.
It's worth noting that the brands responsible for producing vehicles in the segments below the 1200 cm³ and 1500 cm³ benefit thresholds and can thus benefit from the improved GST regulation are not specified in the provided information. Nevertheless, the anticipation is high for upcoming cars in the small car segment, such as the VinFast VF e34, Hyundai Stargazer, Tata Altroz Racer, MG Baojun 510, Lamborghini Huracan Evo Spyder, and Lamborghini Huracan STO.
In conclusion, the lower GST rates on small cars are set to make these vehicles more affordable, potentially boosting demand and reviving the Indian passenger vehicle market. This move is expected to be a significant step towards stimulating the economy and providing a much-needed boost to the automobile industry.
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