The Indian auto industry is hitting the brakes. If you have been planning to buy a new car or a two-wheeler, you are not alone in pressing the pause button. A proposed overhaul of the Goods and Services Tax known as GST has left many consumers in a ‘wait-and-watch’ mode, causing a significant slowdown in sales.
This uncertainty could not come at a worse time, especially with the festive season just around the corner. Showroom footfalls are down, and both dealers and manufacturers are feeling the pinch. They are worried about sluggish stocking and delayed purchase decisions unless the GST Council provides some much-needed clarity, and fast.
BMW Group India’s incoming President and CEO, Hardeep Singh Brar, who steps into his role on September 1, 2025, is echoing these concerns. He fears that the current indecision is threatening robust consumer interest and could even derail the adoption of electric vehicles.
Brar emphasized the urgency: “We urgently need clarity on GST rates to get back to speed and ensure the auto sector’s contribution to economic growth during this quarter is robust.” He is particularly keen on retaining the 5 percent GST for passenger electric vehicles.
Why is this **GST** rate so crucial? It is considered a critical measure that supports localization and e-mobility investment by major players like BMW Group India. Without it, the momentum that EVs have built could easily dissipate.
There is a lot riding on this. Recent reports highlight the seriousness of the situation, with discussions on simplifying the **GST** structure from four slabs to two (5 percent and 18 percent) slated for the GST Council’s September 3-4 meeting. The markets have already shown their anticipation, with auto and consumer shares rallying on August 18. This surge was fueled by hopes that sweeping tax reforms would lower the **GST** on small cars from 28 percent to a more appealing 18 percent. This potential reduction could make small internal combustion engine cars significantly more affordable.
Jefferies also sees a silver lining in GST rationalization. They project that tax cuts could reduce on-road prices by a notable 6-8 percent. This would particularly boost sales for two-wheelers and sub-4-meter cars, leading to industry volumes rising at a Compound Annual Growth Rate of 10 percent for two-wheelers and 8 percent for passenger vehicles through FY28. Imagine the impact on the auto sector!
However, there is a catch. While electric vehicles currently enjoy a favorable 5 percent GST rate, proposals that make ICE small cars more affordable could inadvertently erode the attractiveness of EVs. How? By narrowing the tax differential between them. This could slow down the electric vehicle transition, which numerous nations are working towards.
Brar reiterated his hope, stating, “Expediting clarity on GST rates is essential… We also hope that the sustainable push towards electric cars will continue to be encouraged as a priority and will reflect in the GST strategy by retaining the existing 5 percent GST on all passenger electric vehicles.”
As Brar prepares to take the helm at BMW Group India next month, the entire industry is looking to the GST Council. Everyone is hoping that the upcoming decisions will accelerate India’s EV ambitions rather than bring them to a grinding halt. The clarity on **GST** is vital, not just for sales figures, but for the future of sustainable mobility in the country. The auto industry, a significant contributor to the economy, desperately needs this clarity to navigate through these uncertain times and ensure continued growth and innovation. The future of electric vehicles in India literally rests on these crucial decisions regarding **GST**.