Why Investors Are Excited
According to sources, the government is considering lowering the Goods and Services Tax (GST) on passenger vehicles. Cars with engines below 1,200 cc could see their tax rate drop from 28% to 18%. Hybrid vehicles up to 4 meters in length, equipped with a 1,200 cc petrol or 1,500 cc diesel engine, may also qualify for reduced rates.
Currently, small cars attract 28% GST, along with a cess of 1–3%. For manufacturers like Maruti Suzuki, which sells a large volume of sub-1,200 cc vehicles, this could significantly boost demand.
Maruti Suzuki dominates the small car market in India. A rate cut would make its hatchbacks and compact SUVs more affordable, directly improving sales. The company’s portfolio also includes several hybrids, which may benefit if the proposal extends to eco-friendly vehicles.
Brokerage firms remain bullish. Morgan Stanley noted that autos contribute 14% of GST collections, making them a key sector for reforms. It compared the situation to 2008, when a mix of tax cuts and higher disposable incomes led to a 20% rise in car demand.
Market Reaction and Analyst Views
Maruti Suzuki’s stock was trading at ₹13,884 on Monday afternoon, up 7.3% from the previous session. The stock has already gained 24% in 2025. Analysts see more room for growth if the tax cut goes through.
Out of 46 analysts covering Maruti, 36 have issued a “buy” rating, eight suggest holding, while only two recommend selling. Nomura expects demand to jump by 15–20% if GST on cars is lowered by 10%.
Impact on the Auto Industry
Alongside Maruti, Mahindra & Mahindra (M&M) could be another big winner. Both companies have a strong lineup in the small car and hybrid segments. Industry experts believe this policy change would revive demand across urban and rural markets.
If implemented, the tax cut could ease affordability pressures for middle-class buyers and align with India’s push toward cleaner mobility.
Looking Ahead
The proposal is still under discussion and may come up in the upcoming GST Council meeting. Auto manufacturers, dealerships, and investors are watching closely. A final decision could alter market dynamics ahead of the festive season, traditionally the strongest period for car sales.
For now, Maruti Suzuki’s rally reflects growing optimism that tax reforms could reignite India’s automobile sector.