The Goods and Services Tax (GST) Council’s decision to revise tax slabs on automobiles is expected to create significant turbulence in the automobile and other white goods products retail sector, but sellers remain optimistic about a swift recovery.
With new rates set to take effect from September 22, car dealers across the country anticipate a temporary sales slump as consumers postpone purchases to benefit from the new pricing structure during the festive season.
According to industry players, while the waiting period has prompted fears of a “harrowing” period, dealers are prepared. “In every season of Pitru Paksha, no consumer will buy new vehicles. So we are already prepared for this down in business during this season,” said Saroj Kumar, a Suzuki dealer in Preet Vihar, East Delhi.
Pitru Paksha is a period when Hindus pay homage to their departed ancestors, traditionally refraining from making new purchases.
“But this time, with GST rate cuts, we are hopeful that once Durga Puja celebrations begin, we will recover all our losses soon. There are some losses right now but we are confident of a fast recovery,” he added.
The sentiment was echoed by Saharsh Damani, CEO of the Federation of Automobile Dealers Associations (FADA). He noted that the current business slowdown is also a normal seasonal effect, and he anticipates that the pent-up demand will be released with full force as the festive season begins, offsetting any short-term losses.
The tax framework, which will simplify the current system, is a mixed bag for consumers. Small cars and commuter two-wheelers will become more affordable, with their GST rate reduced from 28 per cent to 18 per cent. This change is expected to lower the sticker price of popular models like the Suzuki Swift, Hyundai i20, and the Royal Enfield Classic 350. The same benefit has been extended to commercial vehicles such as trucks, buses, and ambulances.
Conversely, the new structure introduces a flat 40 per cent GST for all mid-size and large cars, as well as motorcycles above 350 cc. This category includes top-selling SUVs such as the Hyundai Creta, Tata
Harrier and Toyota Fortuner, along with bikes like the KTM Duke 390.
While the new rate is a significant increase from the previous 28 per cent GST, it replaces an additional compensation cess, which previously pushed the total tax incidence close to 50 per cent.
Despite the Government’s visible push for clean fuels and sustainable mobility, with initiatives encouraging the adoption of Electric Vehicles (EVs) and hybrid fuel cars, there was no additional GST slab reduction for these categories. While EVs continue to enjoy the lowest 5 per cent GST rate, the absence of further cuts for hybrids is seen as a missed opportunity and is quite disappointing for consumers who were hoping for a greater push towards greener options.
However with consumers ready to postpone their purchase of white goods items like television, laptops, the retailers in this segment complained that their business will make a huge loss. “The customers who were prepared to buy a TV or laptop from our stores, even those who visited during the last week and made up their mind to buy one, have called us to push their purchase since the new tax slab were announced. Though the tax slab is for the Government only but sale of goods are important. This will not happen for the next fortnight and will affect us a lot,” said Gulshan Chawla of an electronics shopkleeper in Delhi’s East of Kailash area.
“I was to buy a new car and change my laptop. Now I will do after the new tax regime is implemented. We will save of about Rs 40,000 which is a huge amount,” said Preeti Saxena, a resident of Sarita Vihar.