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INDIA REPORT

The Indian automobile industry has received a significant policy boost with the rollout of GST 2.0, a major change in indirect taxes aimed at restoring affordability and stimulating consumption. The reform, which reduces GST rates on vehicles and components, arrives at a crucial juncture when entry-segment sales, rural demand, and OEM margins have been under pressure.

Scale of reduction and market impact. GST 2.0 lowers the rate on small cars and two-wheelers from 28% to 18%, while standardizing the rate on most auto components at 18% instead of the earlier 18%–28% range. Larger SUVs and luxury models now fall under a simplified 40% composite slab, down from nearly 50% earlier. These changes translate into tangible price cuts—ranging from $750 USD (₹65,000) for hatchbacks to over $3,400.00 USD (₹3 lakh) for premium models—resulting in an estimated 10-percentage-point drop in overall tax burden for the sector. Analysts see this as a long-awaited correction that could lift FY26 passenger-vehicle demand by 8–10%.