NIFTY Auto above 25,250, as Maruti Suzuki, Hero MotoCorp, M&M, others rise amid GST rate cut hopes

Shares of carmaker Maruti Suzuki India were trading 7.34% higher at ₹13,881 apiece on the National Stock Exchange (NSE) at 10:45 am, while Mahindra & Mahindra climbed 4.82% to ₹3,422.8.

Stocks of TVS Motors, Ashok Leyland, Bajaj Auto, and Tata Motors rose 7.22%, 7.74%, 4.29%, and 2.59%, respectively.

On Sunday, Prime Minister Narendra Modi said that the central government has circulated the draft of the next-generation GST reforms among states and sought their cooperation to enact the proposal before Diwali.

The PM had announced the proposal to reform GST law in his Independence Day speech on August 15.

In upcoming sweeping reforms, the GST on automobiles – currently in the highest tax bracket – will be restructured to resolve classification disputes related to engine capacity and vehicle size, news agency PTI reported, citing government sources.

Presently, automobiles are taxed at 28%, which is the highest GST slab. A compensation cess, ranging from 1% to 22%, is levied on top of this rate, depending on the type of vehicle.

The total tax incidence on cars, depending on engine capacity and length, ranges from 29% for small petrol cars to 50% for SUVs.

Electric vehicles are taxed at a 5% rate.

A lower GST rate will boost demand and sales, as cars will become affordable. Thereby boosting consumption, a key idea behind the GST overhaul proposal mooted by the Centre, the report said.

The Centre's proposal, which includes doing away with the 12% and 28% slabs, will be discussed by the Group of Ministers (GoM) on GST rate rationalisation on August 21. Thereafter, the GST Council, comprising the Centre and state finance ministers, will likely meet in September and approve the final GST rate structure.

Currently, GST is a four-slab structure of 5%, 12%, 18% and 28%, where essential items are either taxed at nil or a 5% rate and luxury and sin goods are at the 28% slab.

The Centre has proposed to the rate rationalisation GoM to have only 2 slabs in GST - 5% and 18%- and a 40% rate only for a select few goods.