GST Cuts Make Cars And Bikes Cheaper, But Discounts May Soon Shrink

Good news for car and bike lovers in India and those who wish to buy a new vehicle. All thanks to recent GST (Goods and Services Tax) cuts, buying a vehicle has become easier on the pocket, but there’s a twist too.

According to a report by Motilal Oswal, as demand for vehicles increased, the big festive-season discounts you often see on cars, bikes and SUVs may start shrinking in the coming months.

The reason for this is simple, that, when demand rises, companies don’t need to push sales with heavy offers and automakers could also see better profits which is called margin expansion in finance terms, that in turn will help them invest in new models and technologies. The report explains that sales growth expectations across all segments like two-wheelers,

cars, SUVs, commercial vehicles, and tractors are now looking greener than before.

For example:

• Two-wheelers are expected to grow 4% in FY26 and 7.5% in FY27, which earlier was just 1% and 5.7%.
• Passenger cars & SUVs are now expected to grow 3% in FY26 and 8% in FY27.
• Commercial vehicles growth is revised to 5% in FY26 and 7% in FY27.
• Tractors have got a strong boost of 10% in FY26 and 6% in FY27.

So what’s driving this fresh wave of optimism?

The GST Council’s decision to cut taxes on most auto segments is the biggest reason. From September 22, GST on cars and two-wheelers will drop to 18%, which earlier was 28%, while large SUVs now face a flat 40% instead of up to 50%.

That’s not all, as other tailwinds are also helping in the process. A normal monsoon has lifted rural buying power, as interest rates have dropped by nearly 1% this year, and income tax benefits are adding more money into people’s banks. Putting this together, it is expected to make the 2025 festive season one of the strongest in recent years for auto sales.

(Inputs from ANI)