M&M, Maruti, Tata Motors, JK Tyre shares rally; auto industry likely to return to 7% growth with GST rate rejig

Maruti Suzuki India (MSIL) on Thursday said the GST rationalisation would help the automotive industry to come back to about 7% growth on a yearly basis.

In a statement, Maruti Suzuki India Chairman RC Bhargava said the automotive industry would be a direct beneficiary of faster economic development.

The GST Council on Wednesday (September 3) cleared proposed changes to the indirect tax regime, approving an overhaul of rates by limiting slabs to 5% and 18%, effective from September 22, 2025, the first day of Navaratri.

Auto stocks zoomed in the first half of the session on Thursday following the changes; however, they failed to sustain the gains. The NIFTY AUTO index ended at 25,994.85 levels, up 0.85%.

On Friday, auto stocks were trading in the green. The NIFTY AUTO index was trading at 26,322.45, up 1.26%.

Among individual names, Maruti Suzuki India shares were trading over 1% higher at ₹14,837 apiece on the NSE, while Mahindra And Mahindra (M&M) stock was trading nearly 2% higher at ₹3,547. Eicher Motors was trading over 1.5% higher at ₹6,526, while JK Tyre & Industries was up over 1% at ₹348.20.

"The growth of the car industry in general will also benefit from the GST system. We expect the industry growth rate to come back to about 7% a year. Manufacturing growth and employment will both benefit," Bhargava added.

As per earlier estimates, the passenger vehicle segment was projected to witness a modest 1-2% growth in FY26.

In particular, Maruti Suzuki is grateful for small cars being placed in the 18% GST basket, Bhargava stated.

"The 10% lower tax will stimulate a flagging market, and many more people will be able to buy safer and more comfortable means of mobility," Bhargava said.

Terming the GST rate rejig as a major reform, Bhargava noted that it would give a boost to the entire economy and take the country closer to its goal of a Viksit Bharat.

"This reform is another step that would empower the people to shape their future themselves," he added.

The last Budget put a substantial amount of money into people's pockets, besides, borrowing rates have come down due to inflation control and financial prudence, he noted.

"The new GST system will make many items of daily use more affordable. The people will have more purchasing power, and that would stimulate more demand and production. The speed of decision-making and implementation is also admirable," Bhargava stated.

Audi India Head Balbir Singh Dhillon said the automaker views the GST simplification as a step in the right direction - one that supports industry growth and helps expand the market.

"The GST Council's move to retain a low rate for EVs is a welcome step; this brings much-needed clarity and makes our portfolio more accessible to our discerning buyers," he added.

Such reforms help stabilise the business environment and help devise strategies that benefit all stakeholders in the best possible manner, Dhillon said.

JK Tyre & Industries Chairman & Managing Director Raghupati Singhania said that the government has somewhere eased consumer burden while catalysing fresh demand across sectors.

"With regard to GST reduction on tyres from 28% to 18%, and on farm tyres to 5%, it is a landmark reform that will give a tremendous boost to the tyre industry and the mobility ecosystem," he added.

Tyres are an essential part of everyday life, and this progressive step will benefit both consumers and manufacturers alike, Singhania stated.

GST 2.0: Reforms in auto sector

Petrol, LPG and CNG vehicles of less than 1,200 cc and not more than 4,000 mm in length and diesel vehicles of up to 1,500 cc and 4,000 mm in length would move to the 18% rate from the current 28%.

Motorcycles up to 350 cc would be taxed at a lower GST of 18% against 28% currently.

All automobiles above 1,200 cc and longer than 4,000 mm, as well as motorcycles above 350 cc and racing cars, will be charged with a 40% levy.

Small hybrid cars will also benefit, while EVs will continue to be charged at 5%.

GST on tractors with engines less than 1800 cc has been reduced from 12% to 5%. Road tractors for semi-trailers (engine capacity more than 1800 cc) have been lowered from 28% to 18%.

Further, the tax on tractor parts has been reduced to 5%.

The majority of the components used for the manufacture of motor cars and motorbikes, i.e., the auto components, have also been reduced to 18%.