Anticipation of a possible Goods and Services Tax (GST) rate cut on automobiles, has begun to weigh on sales momentum across the industry.
According to Nuvama Institutional Equities’ latest dealer channel checks, customer enquiries remain healthy, but fresh bookings have slowed sharply over the past week as buyers adopt a wait-and-watch approach.
Across two-wheelers (2W), passenger vehicles (PVs), and tractors, dealers are reporting a noticeable dip in booking activity.
Customers, aware of the chatter around GST rationalisation, are enquiring about models but are reluctant to finalise purchases. The widespread expectation is that a reduction in GST rates could translate into price cuts, prompting buyers to delay decisions until clarity emerges.
The Federation of Automobile Dealers Associations (FADA) has also echoed these concerns in recent interactions, highlighting how GST-related uncertainty is already disrupting the near-term demand.
In rural markets, where tractor and entry-level two-wheeler demand is typically more sentiment-driven, awareness about potential GST changes is still limited. However, according to dealers, news of a possible tax cut is spreading quickly and could dampen rural sales momentum further in the coming weeks.
This dynamic is particularly significant for tractors, as rural buyers are sensitive to price changes and often time purchases around perceived cost advantages.
Another point of concern among dealerships is the treatment of existing inventories. Many expect that once the GST cut is announced, the new rates will apply not just on fresh dispatches but also on unsold stock already lying with dealers. Such a move, if confirmed, would allow dealers to pass on lower prices immediately without taking a hit on margins, helping revive sentiment and boost volumes.
Interestingly, the medium and heavy commercial vehicle (M&HCV) segment remains largely unaffected by the likely GST changes. Dealers say this is because GST is typically a pass-through cost for fleet operators, who can claim input tax credits. As a result, purchase decisions in this category continue to be driven more by freight demand and financing availability rather than taxation expectations.
Outlook Hinges on Policy Clarity
On GST rationalisation, the GoM has accepted the Centre’s proposal to eliminate the existing 12% and 28% GST slabs, restructuring the tax regime into just 5% and 18% brackets, with a separate 40% slab for luxury and sin goods. The proposal now awaits GST Council approval ahead of Diwali.
Concurrently, the government is considering reducing GST on small cars and two-wheelers from 28% to 18%, while large cars, including SUVs may move to a 40% slab.
Source from: https://www.cnbctv18.com/auto/gst-cut-hopes-auto-bookings-slow-down-buyers-delay-purchases-19657759.htm
