Automotive leaders applaud GST reset for affordable mobility

In a landmark policy move, the GST Council has introduced sweeping reforms aimed at rationalizing the tax structure across the automotive and electric vehicle sectors. The decision to streamline GST rates into a two-slab framework, 5% and 18%, along with a continued concessional rate on electric vehicles, has been met with wide acclaim from top industry leaders who see this as a decisive step toward inclusive growth, industrial resurgence, and a cleaner, greener future.

These tax reforms come at a critical juncture for India’s economy and particularly the auto industry, which has faced headwinds from inflationary pressures, inventory buildup, and shifting consumer demand. By simplifying the tax code and reducing rates on entry-level cars, two-wheelers, tractors, and electric vehicles, the government aims not only to rejuvenate the sector but also to make personal mobility more accessible to the common citizen.

Voices from the Industry:

Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles Ltd. and Tata Passenger Electric Mobility Ltd., praised the move as a bold vision for India’s next-gen tax architecture: “These reforms reflect Prime Minister Narendra Modi’s vision for next-generation GST that prioritizes both ease of living and ease of doing business. The streamlined GST framework goes beyond rate rationalization with structural reforms enhancing long-term confidence in India’s economic environment.
The GST Council’s decision to retain the 5% GST rate on electric vehicles is a forward-looking move that reinforces India’s commitment to sustainable, zero-emission mobility and signals long term policy stability. The reduction of GST on small cars to 18% further expands access to personal mobility, making it more affordable for a broader section of society. Together, these measures will not only accelerate EV adoption but also drive innovation, strengthen domestic manufacturing, and propel India toward a cleaner, smarter, and self-reliant mobility future.”

Rajesh Jejurikar, ED & CEO – Auto and Farm Sector, M&M, emphasized the reform’s impact across both rural and urban landscapes: “We applaud the Government for this landmark GST rationalisation, which will have a far-reaching positive impact across the automotive and farming sectors. The move makes tractors and farm machinery more affordable for farmers, reduces costs for commercial vehicles and improves accessibility for personal mobility through rationalisation of rates across all SUVs. Together, these measures are expected to stimulate demand, and drive inclusive growth across the entire ecosystem.
We also appreciate the continuation of the 5% GST rate on EVs, which is a critical enabler of India’s clean mobility vision. This measure will further accelerate the adoption of electric vehicles and reinforce India’s leadership in sustainable, green transportation.”

Venkatram Mamillapalle, Managing Director, Renault India, called the reforms a “festive gift” for consumers and a major tailwind for the automotive sector: “We welcome the GST Council’s decision to rationalize rates into a two-slab structure of 5% and 18%, a landmark reform for the Indian economy. This is indeed an early festive gift from the Government, lifting consumer sentiment, easing household expenses, and strengthening confidence in long-term growth. For the automobile sector, the move is transformative. The GST reduction on the entry level car segment (petrol below 1200 cc and diesel below 1500 cc) from 28% to 18%, and a uniform rate for auto components at 18%, make personal mobility significantly more affordable for the masses.

The rationalized GST will ease household expenses, fuel consumption, and create a multiplier effect on long-term economic growth. With reduced taxes on tractors, agri-inputs and farm equipment, the GST reform will boost rural demand, strengthen agri-linked enterprises, and create new growth avenues in semi-urban and rural India. This will unlock fresh demand in Tier 2, Tier 3, and rural markets where improving farm incomes are driving aspirations for car ownership. Renault is well positioned to leverage this shift, and we believe the reform will accelerate rural and urban demand alike, boost manufacturing, and contribute strongly to India’s economic momentum.”

Toyota Kirloskar Motor’s Deputy Managing Director, Swapnesh R Maru, focused on the broader vision of a resilient and self-reliant economy: “We thank and congratulate the Government for the landmark second generation GST reform, a significant step towards accelerating India’s journey to a stronger and more resilient economy. Beyond empowering the common man, this reform is poised to enhance market confidence, strengthen consumer sentiment and stimulate investments — collectively broadening prosperity across the nation. The relief extended to smaller vehicles, along with the rationalization of levies on larger ones, will enhance mobility for the common man by making it more accessible and affordable, while at the same time stimulating growth across the automotive sector.
As a next step, it is essential to reduce fossil fuel imports and achieve our stated national objectives of energy self-reliance, promotion of bio-fuels and decarbonisation. Given India’s rapid economic growth that is bound to increase the demand for energy, particularly fossil fuel consumption by transportation sector, it is crucial that all cleaner and greener technologies are also promoted and incentivised through suitable policy measures, including taxation so that these are preferred by consumers over the conventional petrol and diesel vehicles.”

Leaders of Two-Wheeler companies also echoed a similar sentiment:

Diego Graffi, Chairman & Managing Director, Piaggio Vehicles Pvt. Ltd., said “The new GST framework is a crucial step towards creating a more balanced and transparent tax structure, benefitting not only OEMs but also enabling consumers to better understand pricing. The reduction of GST rates on two-wheelers below 350cc will improve accessibility for a wider base of consumers and further support demand growth. While the revised rates for premium segments should be reconsidered to ensure that the framework overall reflects a clear intent to establish simplicity and consistency across categories. At Piaggio India, we view this framework as an opportunity to grow with greater clarity and consistency, while committing to progressively navigating these changes and continuing to work closely with the government and industry stakeholders to strengthen our growth in India.” 

TVS Motor Company Chairman, Sudarshan Venu, linked the tax cut directly to middle-class empowerment: “We applaud the government for taking consistent steps towards boosting growth and enhancing the growing middle class’s spending power – all towards realising PM’s vision of Viksit Bharat 2047. The GST tax cuts is a major move by the government to further turbocharge growth. It will significantly boost consumption across segments of the society. For our industry especially, it’s a welcome move as it will help 2Ws become more accessible and also help those looking to upgrade.”

Startups and EV ecosystem leaders echoed similar optimism.

Pratik Kamdar, Co-founder & CEO of Neuron Energy, highlighted the need for a holistic GST structure for the EV ecosystem: “The continuation of the 5% GST rate on electric vehicles is a positive step in maintaining affordability and supporting demand in the segment. As the sector grows, there is increasing relevance in exploring GST rationalisation for the broader EV ecosystem including batteries, charging infrastructure, and battery swapping services. A uniform tax structure across these components could help reduce operational inefficiencies, streamline costs, and improve accessibility for both manufacturers and consumers.

Such an approach may also provide clearer signals for long-term investment and planning, particularly in areas like localized manufacturing and energy innovation. Greater alignment between taxation and sector needs may ultimately contribute to a more integrated and sustainable clean mobility ecosystem in India.”

Akshit Bansal, Founder & CEO of Statiq, urged a tax alignment for EV charging infrastructure: “The GST Council’s reforms provide significant momentum for the electric vehicle industry and the broader goal of sustainable mobility in India. By rationalizing rates for vehicles, auto parts, these measures create a more inclusive, investor-friendly environment and accelerate the transition to clean transportation. The focus on making EVs and their components more affordable will benefit manufacturers, innovators, and consumers alike.
Importantly, maintaining the 5% concessional GST rate on all electric vehicles clearly demonstrates the government’s commitment to clean mobility and ensures India remains on course for widespread electric vehicle adoption. However, it is now essential to align the GST structure for charging infrastructure with the same 5% slab as EVs themselves. This step would not only catalyze further investments in the charging network but also help build a seamless, robust support system for electric mobility across the country.
Statiq applauds the government’s vision for a simplified, citizen-centric GST that empowers the next phase of automotive transformation and looks forward to continued policy support in expediting the development of India’s EV charging ecosystem.”

Nishchal Chaudhary of BattRE Electric Mobility highlighted the relief from an inverted duty structure: “We welcome the government’s move to reset the GST. This step will significantly ease working capital stress across industries and particularly for the electric vehicle sector, which has long been operating under an inverted duty structure. By addressing this imbalance to some extent, the GST reset will support EV manufacturers and will also accelerate the transition towards sustainable mobility in India.”

From a financial perspective, experts such as Jitin Makkar of ICRA and Saurabh Agarwal of EY noted the macroeconomic ripple effects:

“The GST rate cut is a welcome relief for the automobile sector, which has been grappling with sluggish demand (from both domestic and exports) and inventory build-up pressures. Lower tax incidence directly translates into reduced on-road prices, making vehicles more affordable for consumers. This is particularly significant for entry-level cars and two-wheelers, where price sensitivity is high. The move is expected to revive showroom footfalls, accelerate retail sales, and help OEMs clear existing stock. Additionally, it would have a positive spillover effect on ancillary industries such as auto components and financing. The organised auto aftermarket segment, comprising spare parts, components, batteries, tyres, lubricants, repairs etc., will also benefit as the pricing differential with the unorganised segment narrows. While the long-term trends will still hinge on income sentiment and fuel prices, the immediate effect is likely to be a positive uptick in demand, particularly in the entry and the mid-price automobile segments.” – Jitin Makkar, ICRA

“The rationalization of GST rates on automotive vehicles and parts is a truly welcome and significant development. By making vehicles more affordable across all segments, this move will not only boost consumer spending but also simplify complex classification disputes that have long burdened the industry. The discontinuance of the cess is a particularly pragmatic step, which will provide much-needed support to a sector that is a vital contributor to our nation’s GDP.
While this change is broadly positive, the automotive industry must now carefully reassess the financial impact of state incentives.” –  Saurabh Agarwal, EY