Auto GST cut: Winners & proxies

The goods and services tax (GST) rate changes are largely positive for the Indian automobile sector. Still, the finer nuances have to be understood before deciding the prime beneficiaries.

- Manish Joshi

GST rates for premium large cars—petrol cars above 1200 cc, diesel cars above 1500 cc and cars exceeding a length of 4,000 mm—have been increased to 40% from 28%. Sure, the compensation cess of 15% has been removed, which will make it cheaper than the earlier rate of 28% plus cess of 15%.

What's more exciting is that customer interest could once again revive in small cars below the specifications mentioned earlier as the GST for them has been reduced to 18% from 28%. It would mean a drop of about 7% in prices for the buyer.

Maruti Suzuki India Ltd, the domestic small car champion, is likely to benefit the most as at least 50% of its sales volume falls under the new 18% GST rate now, while it's 40% for Hyundai Motor India Ltd.