Auto: GST 2.0— Proposed Rationalisation Likely Before Festive; Maruti Suzuki, M&M Among Motilal Oswal Top Pick

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Motilal Oswal Report

Currently, GST operates in four slabs of 5%/12%/18%/28%. The auto sector in general falls in the 28% slab with an additional compensation cess based on various classifications, pushing tax rates higher.

The Finance Ministry has recently proposed a simplified GST rate structure, in which it seeks to remove the 28% (merge it with 18%) and 12% slabs (merge it with 5%) and keep a 40% peak slab for few “sin goods”.

If this were to be approved, the 18% slab would contribute to the majority of GST collections (80%), 5% would be for essential goods and 40% for a few sin goods.

What could be the potential timelines?

As of now, the GoM has approved this three-slab structure, which will now have to be approved by the GST Council, which is scheduled to meet on Sep 3rd, 4th 2025. The GoM’s approval would also indicate that a lot of groundwork has already taken place to ensure a smooth implementation by the government.

As per the expert, the GST Council meeting, which was scheduled for the third week of Sep’25 earlier, seems to have been preponed to ensure that in case there is a need to deliberate one more time, another meeting can be held in the third week of Sep’25.

Once this proposal is passed by the GST Council, the rate change can be notified in a few days and the implementation date can be announced.

Thus, there is a high likelihood that the decision is likely to be taken before this year’s festive season, which would also mean that OEMs would not lose out on festive sales

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