© The Indian Express Pvt Ltd
Tags:
Journalism of Courage
On the very first day since the new Goods and Services Tax (GST) regime kicked in on Monday (September 22), Maruti Suzuki received a record 80,000 enquiries and delivered 25,000 cars — something it says it hasn’t seen in over three decades. Tata Motors also saw over 25,000 enquiries and made 10,000 deliveries.
While GST 2.0 has given a boost to car buyers, other factors played a role too: pent-up demand for virtually no sales happened leading up to the new regime’s start date, as buyers waited for rate cuts to kick in, the end of the Shraadh period, and the upcoming festive season.
Under the next-generation reforms for GST, small cars with engine capacity not exceeding 1200 cc (petrol) and 1500 cc (diesel) and with length not over 4 metre will now be in the 18 per cent slab against 28 per cent plus cess levy earlier. Bigger cars will be taxed at 40 per cent (as against 28 per cent), with additional compensation cess of 17-22 per cent, taking the total tax to 50 per cent in some cases. All automotive parts will now be taxed at 18 per cent.
A senior executive from Maruti Suzuki said since it announced the price cuts over and above the GST, it has received 75,000 bookings, with nearly 15,000 bookings coming in every day, which is 50% higher than usual for the carmaker.
“The response from customers has been phenomenal — something we haven’t seen in the last 35 years. On the very first day, we recorded 80,000 enquiries, and have already delivered over 25,000 cars, with deliveries expected to touch 30,000 shortly. Since 18th September, when we announced additional price reduction (over and above GST), we have received 75,000 bookings, with nearly 15,000 bookings coming in every day — about 50% higher than usual,” said Partho Banerjee, head of marketing and sales for Maruti Suzuki.
“Demand for small cars has been especially strong, with bookings growing by nearly 50%. Enquiries remain very high, and we may even run out of stock for certain variants. Dealers are staying open late into the night to deliver cars to customers. Compared to last year, the overall response has been exceptionally strong,” he added.
Lull before the storm
The Indian Express had reported that leading up to September 22, showrooms had cut a deserted look as they anticipated deep discounts after the tax rate reduction, but were in for some disappointment as the transitional issues for dealers resulted in hurdles in the full pass through of the benefits.
Besides, a car dealer had said at the time that while people from the Muslim and Sikh communities were buying some cars, many Hindus were not because of Shraadh.
While the GST overhaul reduced the rates on several cars and also did away with the compensation cess, dealers who had requisitioned the cars from manufacturers at the older rates have paid GST and cess on it. Those cars, which dealers had stocked up due to the incoming festive season, were proving difficult to sell, as customers were unwilling to buy cars at the older rate.
As a result, dealers were having to offer a discount on those cars out of their own pockets, with estimates suggesting that they could be staring at losses of Rs 2,500 crore, eroding their working capital. They are unsure whether there will be some relief in terms of refunds, and where it might come from.
At the time, the Federation of Automobile Dealers Association (FADA) wrote to the Finance Ministry, saying that dealerships were “extremely anxious”. “While GST 2.0 subsumes the earlier Compensation Cess regime for automobiles, dealers today hold significant, validly-availed Compensation Cess balances in their electronic credit ledgers. Once no further cess liability arises, these balances cannot be utilised against CGST/SGST/IGST under the current law. Without a transitional pathway, credits risk lapsing, creating an unintended, permanent loss and a sharp working-capital shock for compliant MSME dealerships,” FADA said.
As Maruti’s Banerjee said, small cars and SUVs are receiving the highest amount of traction among car buyers due to significant price reduction, which could make such cars accessible for those graduating from two-wheelers. This had become a sluggish segment in the last few years due to underlying consumption issues.
According to industry data, sales performance of entry-level cars priced below Rs 5 lakh — a crucial indicator of demand in the economy given that this segment largely attracts first-time buyers — is dire. This segment used to account for nearly a million units a decade ago, with 9,34,538 in FY16. It has since declined to just 25,402 units in FY25. The Maruti Suzuki Alto, for instance, sold more than 18,700 units in June 2019, and was the best-selling then. In June 2025, the Alto and S-Presso combined sold a little over 6,000 units.
In April-June 2025, passenger vehicle sales declined 1.4 per cent over the same quarter last year, and passenger car sales declined by more than 11 per cent in the same period.
According to data collected by the NGO People Research on India’s Consumer Economy, which some carmakers refer to internally, car penetration in Indian households that have a yearly income of less than Rs 4 lakh reduced to 1.4 per cent in FY20, from 1.9 per cent in FY16.
Car penetration in households that earn between Rs 4 lakh to Rs 7 lakh annually also reduced to 8.3 per cent from 12.1 per cent in the same time period.
Families with incomes of less than Rs 4 lakh and between Rs 4 lakh and Rs 7 lakh are said to make up for around 80 per cent of all Indian households. Though FY20 was the latest data available with a carmaker, they said the trend has not changed in the subsequent years.
