Auto Stocks Zoom On GST Rate Cuts: Escorts Kubota, M&M, Eicher Motors Lead Pack

Most auto stocks rallied on Sept.4, led by Escorts Kubota Ltd., Mahindra And Mahindra Ltd. and Eicher Motors Ltd., after the Goods and Services Tax Council, chaired by Finance Minister Nirmala Sitharaman on Wednesday declared a new tax scheme.

As per the new GST reform, the rate on petrol and petrol hybrid, liquified petroleum gas, and compressed natural gas cars (not exceeding 1,200 cc and 4,000mm) will be reduced from 28% to 18% at its 56th meeting. All rates will go into effect on Sept. 22, the first day of Navratri.

The GST Council Meeting, announced GST on small electric cars, electric SUVs and luxury electric cars to remain at 5%. While, all automobile parts will have a uniform taxation rate at 18%.

Small cars and entry-level bikes are set to get cheaper as the GST Council on Wednesday approved a complete overhaul of the tangled GST regime.

Similarly diesel and diesel hybrid cars (not exceeding 1500 cc and 4000mm) will also see GST go down from 28% to 18%. Motorcycles (350 cc and below) will also be applicable for the reduction to 18% from 28%. Those exceeding 350 cc will be charged at 40%.

Motor vehicles for the transport of goods such as buses, trucks and ambulances will also have a similar tax exemption, reducing from 28% to 18%, as per new GST reforms.

Auto stocks rally was led by Escorts Kubota Ltd., that advanced over 10%, followed by Atul Auto Ltd., at over 10% and Mahindra and Mahindra Ltd., at over 7% as of 9:25 a.m. This compares to a 0.6% advance at the NSE Nifty 50.

VST Tillers Ltd., Eicher Ltd., TVS Motors Ltd., were trading higher at over 5%, 3% and 1% respectively.

Tata Motors Ltd., and Hyundai Motor India Ltd., were both trading higher at over 1%.

Meanwhile, Ashok Leyland Ltd., fell as much as 1.29% so far.