India vehicle buyers delay purchases as GST rate changes loom

Indian car and motorcycle buyers are postponing purchases ahead of a Goods and Services Tax Council meeting in New Delhi on September 3 and 4 as the government considers a sweeping rationalisation of consumption taxes that could cut levies on most mass-market vehicles while altering rates for some electric models. The uncertainty has softened demand but could also spark a sharp rebound during the festive season if cuts are confirmed, analysts and industry executives said.

A Group of Ministers on rate rationalisation has proposed moving many vehicle segments from the 28 percent GST slab to 18 percent, and cutting certain items such as tractors to 5 percent, according to officials and industry reports. Brokerage Jefferies said such moves could reduce on-road prices by roughly 6 to 8 percent and lift affordability, particularly for two-wheelers and small passenger vehicles. Jefferies raised volume forecasts for 2Ws and passenger vehicles and predicted a meaningful uptick in demand if the cuts are enacted.

Traders and dealers are already seeing tentative signs. Jefferies flagged early trends in registrations with tractors up, two-wheelers and trucks showing gains, while passenger...