loader2
Login Open ICICI 3-in-1 Account
  • Text Size
  • Text to Speech
  • Color Contrast
  • Pause Animations

Open ICICI
3-in-1 Account

Manage your Savings, Demat and Trading Account conveniently at one place

+91

BLOG

GST reform 2.0 – Significant consumption boom ahead

ICICIdirect Research 05 Sep 2025 DISCLAIMER

Government under GST 2.0 Reform has slashed tax rates across the automobile sector.

Small cars, motorcycles up to 350cc, and three-wheelers will now attract 18% GST versus 28% earlier, while buses, trucks, and ambulances also shift to 18%.

Further, a uniform 18% GST rate on all auto parts has been introduced vs. the previous tax incidence of 28%, removing the classification disputes and simplifying the tax structure.

Agricultural and farm machinery like tractors and harvesters as well as their components have also seen a reduction from 12% to 5%, indirectly benefiting the rural auto ecosystem.

These changes, effective September 22, 2025, aim to improve affordability, spur demand, and streamline compliance for the industry.

In essence all Passenger Vehicles, Commercial Vehicles, 3-W & 2- W (<=350 cc) will witness a price cut.

Uniform GST rate of 5% on EV’s across all categories of vehicles is a welcome step.
Only vehicle category which will witness a price hike will be the motorcycle category with >350cc which will now subject to 40% tax rate vs. 31% in the past (accounts for only ~1.4% of industry volumes). This is marginally negative for Eicher Motors which drives ~9% of domestic volumes from this segment.

Our top bet in OEM space: Maruti Suzuki (BUY, Target Price: ₹ 17,160), Mahindra & Mahindra (BUY, Target Price: ₹ 4,180) and Ashok Leyland (BUY, Target Price: ₹ 155).

While we see maximum upsides in Sansera Engineering (BUY, Target Price: ₹ 1,620), Lumax Auto Tech (BUY, Target Price: ₹ 1,285) and Steel Strip Wheels (BUY, Target Price: ₹ 290) in our ancillary coverage.

Download ICICI Direct app

Invest, Track, and Manage your Portfolio Anytime, Anywhere

Download ICICI Direct app

Invest, Track, and Manage your Portfolio Anytime, Anywhere