Fiscal Nudges Demand

The recent decision of the GST Council to reduce the tax on passenger vehicles up to 1,200 cc from 28 per cent to 18 per cent marks a turning point for both consumers and the automobile sector.

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The timing, coinciding with the festive season beginning on the first day of Navaratri, has created a wave of anticipation that is already altering market behaviour. Banks are experiencing a surge in cancellation requests for approved car loans, as customers prefer to delay their purchases until the new rates take effect. For borrowers, the calculation is simple: the marginal charges for cancelling a loan pale in comparison to the financial benefits of a reduced tax outgo. As a result, many are prepared to undergo the process afresh, confident that the eventual savings will outweigh the temporary inconvenience. For car dealers and banks, however, this pause in demand has introduced a momentary disruption, highlighting the immediate impact of fiscal policy decisions on consumer choices. The cancellation trend is a reminder that consumers are becoming increasingly astute in timing their purchases, carefully weighing every rupee saved against the backdrop of volatile market conditions and changing regulatory landscapes.