Auto GST cut: Winners & proxies

Racing ahead Hero and Maruti stocks are the top gainers after initial hints of GST rate cuts in PM Modi's Independence Day speech.

- Manish Joshi

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.

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.