GST Overhaul May Cut Vehicle Prices by Up to 8.5%: Report

New Delhi — The government’s move to restructure the Goods and Services Tax (GST) into three slabs—5%, 18%, and 40%—is expected to provide significant relief to the automobile industry and consumers, with vehicle prices projected to drop by as much as 8.5%, according to a report released on Thursday.

Crisil Intelligence, in its analysis, said that prices of entry-level hatchbacks, premium hatchbacks, compact sedans, and sub-compact SUVs powered by petrol engines under 1,200 cc or diesel engines under 1,500 cc could fall by around 8.5%.

Prices of large sedans, compact SUVs, mid-size SUVs, and MPVs below 1,500 cc are likely to see a decline of about 3.5%. Premium SUVs and MPVs with engines above 1,500 cc could become cheaper by nearly 6.7%.

For two-wheelers, almost all internal combustion engine (ICE) models will get cheaper by about 7.8%, except premium bikes above 350 cc, which may see prices rise by around 6.9%.

In addition, ICE tractors and fuel-cell vehicles, including hydrogen-powered models, are expected to become 6.3% cheaper, while three-wheelers, light commercial vehicles (LCVs), medium and heavy commercial vehicles (MHCVs), and buses could see a 7.8% reduction in prices.

The analysis excludes the potential impact of GST pass-through from automotive component manufacturers to OEMs, as all components will now fall under the 18% slab. This change will reduce prices of components previously taxed at 28% by about 7.8%, benefiting the automotive aftermarket as well.

From a sales perspective, Crisil projected that in FY2026, passenger vehicles may see modest single-digit growth, two-wheelers are expected to record higher single-digit growth, tractors could expand by 4–7%, while commercial vehicles may witness flat to marginally positive growth.

Electric vehicles, meanwhile, will continue to attract a concessional 5% GST, even as other vehicle segments shift to the revised 18% and 40% rates.

With inputs from IANS