41 Percent of Indians Plan Vehicle Purchase This Festive Season as GST 2.0 Boosts Affordability - Grant Thornton Bharat Survey

Luxury vehicles, including larger cars and SUVs, will likely remain under a higher GST slab of 40%. This means that while small cars and two-wheelers will see significant price reductions, luxury models may not benefit similarly. The expectation is that the tax burden on premium cars will still be substantial, thus not significantly boosting their affordability during the festive season.

Electric vehicles will continue to enjoy a reduced GST rate of 5%, which is significantly lower than the rates for conventional vehicles. This preferential treatment is intended to encourage the adoption of EVs, making them more financially accessible and attractive to consumers as the market shifts towards greener alternatives.

The GST rate cut is expected to stimulate demand in the automotive sector, particularly among budget-conscious consumers in Tier 2 and Tier 3 cities. With reduced prices on small cars and two-wheelers, more first-time buyers may enter the market, potentially leading to a significant boost in sales during the festive season.

Stable economic conditions, including steady incomes and low inflation, contribute to increased consumer confidence, which is vital for big-ticket purchases like vehicles. The combination of improved financial wellbeing and favorable tax reforms has made consumers more willing to invest in new vehicles, leading to higher purchase intent.

The two-wheeler market will see significant benefits for commuter and mid-segment motorcycles, particularly those with engine capacities below 350cc, which will now be taxed at 18%. This change is expected to enhance affordability for a larger segment of consumers, promoting higher sales in the entry-level motorcycle category.