GST council meeting: Auto stocks like Mahindra & Mahindra (M&M), Tata Motors, Samvardhan Motherson, and Maruti Suzuki witnessed a significant rally of up to 6 per cent in Thursday’s trading session after the government reduced GST rates for vehicles and auto parts.
M&M share price was the top gainer in the Nifty Auto index, and was up nearly 6.5 per cent on September 4. Meanwhile, Eicher Motors, Balkrishna Industries, and Tata Motors shares were also up 2.46 per cent, 1.88 per cent and 1.24 per cent, respectively.
Other auto stocks like Samvardhan Motherson, TVS Motor, and Maruti Suzuki were trading higher up to 1.5 per cent.
GST Council meeting: GST cut to 18% on small cars
To boost demand in the automobile industry, the government has revised the Goods and Services Tax (GST) structure for vehicles and auto components. The removal of the Compensation Cess has made many categories of vehicles more affordable.
Under the new framework, the 12 per cent and 28 per cent GST slabs have been eliminated, while the 5 per cent and 18 per cent slabs remain unchanged. Additionally, a new 40 per cent slab has been introduced for luxury and sin goods.
The government has slashed GST on small vehicles — four-wheelers under 1500cc and 4000 mm in length, and two-wheelers below 350cc — from 28 per cent to 18 per cent. Larger cars exceeding 1500cc and 4000 mm will also benefit, as the 3 per cent compensation cess has been removed.
However, the GST on motorcycles with engine capacity exceeding 350cc has been raised to 40 per cent, impacting companies like Eicher Motors (Royal Enfield), M&M (SUVs), and luxury car importers such as Mercedes and BMW.
The GST on electric vehicles remains unchanged at 5 per cent. Meanwhile, the tax on entry-level cars, tractors, and small-engine hybrids has been reduced to 18 per cent to stimulate rural and middle-class demand.
“Lower prices would likely stimulate demand recovery across segments, and the impact is expected to be more in the mass-market categories. Auto components players having higher domestic exposure will benefit from stronger OEM demand. Export dependent players will likely see limited benefits,” said Arun Agarwal, VP Fundamental Research, Kotak Securities.
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