GST Rate Cut Sparks Optimism: Maruti Suzuki Chairman Predicts 10% Growth in Small Car Sales

8th September 2025, Kathmandu

In a significant boost for India’s automotive sector, Maruti Suzuki Chairman R.C. Bhargava has hailed the government’s recent Goods and Services Tax (GST) reform

Maruti Suzuki GST Cut

As a “landmark move” that promises to inject new life into the industry, particularly the crucial small car segment.

Speaking on the reforms, Bhargava expressed confidence that the sharp reduction in GST rates on small cars would catalyze a substantial turnaround, projecting a robust 10% annual growth for this category.

The GST Council’s decision to slash the tax rate on small petrol, LPG, and CNG cars (under 1,200 cc and 4,000 mm length) from 28% to 18% is at the heart of this renewed optimism.

This move, which also included the scrapping of the cess, has been widely applauded by industry leaders who have long sought relief to counter a prolonged period of subdued demand and rising costs.

For a market where affordability is paramount, this tax reduction is expected to make entry-level cars more accessible to a larger consumer base.

Bhargava’s prediction is particularly significant for Maruti Suzuki, as the small car segment accounts for approximately 70% of the company’s total sales.

The chairman stated that this growth would not be limited to the small car market alone, but would have a ripple effect, propelling the entire automotive industry towards a healthy annual growth rate of 7-8%.

This outlook marks a stark reversal from previous forecasts, which had anticipated a sluggish growth of just 1-4% for the current financial year. The benefits of the GST cut are already being translated into tangible price reductions for consumers.

According to industry analysis, the price of popular models like the Maruti Suzuki Alto could see a drop of ₹40,000–50,000, while the entry-level WagonR might become more affordable with a price reduction of ₹60,000–67,000.

These price cuts are a direct result of the tax reform and are expected to stimulate demand during the upcoming festive season and beyond. Bhargava noted, however, that the actual price reduction might be closer to 9% rather than the full 10%, as automakers still need to account for transportation costs and dealer margins.

While the immediate impact of the reform might be constrained by the limited time left in the current fiscal year, the long-term implications are far-reaching.

Bhargava emphasized that this is a long-term measure designed to stimulate the economy and empower consumers with greater purchasing power.

He likened the reform to bringing “the butter back on the plate” for automakers, signalling a return to profitability and sustained growth after several challenging years.

Beyond the immediate tax cuts, the discussion also touched upon the broader landscape of automotive technology. When asked about the future of hybrid and electric vehicles, Bhargava maintained a pragmatic stance.

He noted that while electric vehicles are being given a prime position in India’s plan to achieve net-zero emissions, hybrids and EVs currently constitute a small fraction of Maruti’s sales.

He stressed the need for a taxation system that encourages all technologies leading to cleaner cars and reduced oil consumption, not just electric vehicles. He pointed out that in many countries, hybrids and EVs are taxed at a similar rate, and India should consider a similar approach to incentivize diverse clean-tech solutions.

The chairman also used the opportunity to address broader geopolitical issues, calling for a united Indian front against punitive measures like the US tariffs on Indian products. He reaffirmed the company’s commitment to supporting the government and contributing to the nation’s economic growth.

In conclusion, the GST reforms represent a pivotal moment for the Indian auto industry. By making small cars more affordable, the government has set the stage for a significant revival, led by a surge in demand and production.

The positive outlook from a seasoned industry veteran like R.C. Bhargava solidifies the belief that this reform is not just a short-term fix but a strategic move that will shape the future of mobility in India for years to come.

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