How GST 2.0 has sparked India’s biggest car buying boom in years
Carmakers are ramping up capacity to meet growing demand for passenger vehicles following the GST tax rationalisation in 2025.
- Sep 23, 2026,
- Updated Sep 23, 2026 4:06 PM IST
The Goods and Services Tax (GST 2.0) reforms, which came into effect on September 22, 2025, have boosted vehicle affordability and demand, prompting Indian automakers to step up capacity expansion as sales growth gathers pace.
Since GST 2.0 was implemented, monthly wholesales of around 4 lakh units have become the new normal, reflecting the sector’s robust growth trajectory, said Tarun Garg, MD and CEO of Hyundai Motor India Ltd.
Through the GST rationalisation in 2025, the government simplified and slashed standard tax rates from 28% to 18% for the segment that makes up the bulk of automotive sales.
The passenger vehicle industry recorded year-on-year growth of more than 15% during September 2025-March 2026, and over 29% during April-August FY27, demonstrating the strong impact of the reforms, Garg added.
Hyundai is deepening its manufacturing footprint in India through capacity expansion, including the acquisition of General Motors’ Talegaon plant in Pune.
Maruti Suzuki India Ltd, the country’s largest carmaker, has seen entry-segment demand grow by more than 96% following the GST reforms.
The sharp increase reflects stronger consumer demand, as improved affordability is helping more households transition from two-wheelers to four-wheelers, the automaker said.
DON'T MISS | TVS Motor to increase monthly EV capacity to over 50,000 units as sales boom
For many first-time buyers, the lower tax incidence has brought car ownership within reach, boosting aspirations among middle-class and emerging consumers.
“A year ago, the landmark GST reform gave fresh impetus to India’s growth journey. At Maruti Suzuki, passenger vehicle sales grew about 36% year-on-year during April-August 2026. We are particularly encouraged by the entry segment’s growth of over 96%, where improved affordability has brought mobility closer to many more people,” said Hisashi Takeuchi, MD and CEO, Maruti Suzuki.
“When domestic industry gains scale and competitiveness, more global business automatically shifts to us, leading to higher exports. Encouraged by this growth, we are accelerating our capex plans, which in turn will create a multiplier effect across the economy,” Takeuchi said.
The increase in demand is also prompting the Mahindra Group to invest in additional capacity across its businesses, said Anish Shah, Group CEO and MD, Mahindra Group.
MUST READ | 90% EVs exported out of India are from Maruti Suzuki: MD & CEO Hisashi Takeuchi
“GST 2.0 was an important milestone in India’s journey towards a simpler, more efficient and growth-oriented tax regime,” Shah said.
“Over the past year, businesses at the Mahindra Group have seen a significant positive impact. Since the GST rationalisation, SUVs have grown 17%, while LCVs and tractors have grown 20%. At Mahindra Finance, GST 2.0 improved vehicle affordability and demand, driving higher disbursements, while stronger customer cash flows are supporting healthier repayments,” he said.
The momentum reflects the role tax rationalisation can play in improving affordability and supporting demand across both urban and rural India, Shah said.
“The effects extend beyond individual sectors. A simpler tax structure, lower transaction costs and greater predictability can improve competitiveness, support investment and strengthen supply chains across manufacturing, financial services, real estate, hospitality and technology,” Shah said.
“As a result of the enhanced demand, we are making further investments to increase capacity across multiple businesses,” he added.
The Goods and Services Tax (GST 2.0) reforms, which came into effect on September 22, 2025, have boosted vehicle affordability and demand, prompting Indian automakers to step up capacity expansion as sales growth gathers pace.
Since GST 2.0 was implemented, monthly wholesales of around 4 lakh units have become the new normal, reflecting the sector’s robust growth trajectory, said Tarun Garg, MD and CEO of Hyundai Motor India Ltd.
Through the GST rationalisation in 2025, the government simplified and slashed standard tax rates from 28% to 18% for the segment that makes up the bulk of automotive sales.
The passenger vehicle industry recorded year-on-year growth of more than 15% during September 2025-March 2026, and over 29% during April-August FY27, demonstrating the strong impact of the reforms, Garg added.
Hyundai is deepening its manufacturing footprint in India through capacity expansion, including the acquisition of General Motors’ Talegaon plant in Pune.
Maruti Suzuki India Ltd, the country’s largest carmaker, has seen entry-segment demand grow by more than 96% following the GST reforms.
The sharp increase reflects stronger consumer demand, as improved affordability is helping more households transition from two-wheelers to four-wheelers, the automaker said.
DON'T MISS | TVS Motor to increase monthly EV capacity to over 50,000 units as sales boom
For many first-time buyers, the lower tax incidence has brought car ownership within reach, boosting aspirations among middle-class and emerging consumers.
“A year ago, the landmark GST reform gave fresh impetus to India’s growth journey. At Maruti Suzuki, passenger vehicle sales grew about 36% year-on-year during April-August 2026. We are particularly encouraged by the entry segment’s growth of over 96%, where improved affordability has brought mobility closer to many more people,” said Hisashi Takeuchi, MD and CEO, Maruti Suzuki.
“When domestic industry gains scale and competitiveness, more global business automatically shifts to us, leading to higher exports. Encouraged by this growth, we are accelerating our capex plans, which in turn will create a multiplier effect across the economy,” Takeuchi said.
The increase in demand is also prompting the Mahindra Group to invest in additional capacity across its businesses, said Anish Shah, Group CEO and MD, Mahindra Group.
MUST READ | 90% EVs exported out of India are from Maruti Suzuki: MD & CEO Hisashi Takeuchi
“GST 2.0 was an important milestone in India’s journey towards a simpler, more efficient and growth-oriented tax regime,” Shah said.
“Over the past year, businesses at the Mahindra Group have seen a significant positive impact. Since the GST rationalisation, SUVs have grown 17%, while LCVs and tractors have grown 20%. At Mahindra Finance, GST 2.0 improved vehicle affordability and demand, driving higher disbursements, while stronger customer cash flows are supporting healthier repayments,” he said.
The momentum reflects the role tax rationalisation can play in improving affordability and supporting demand across both urban and rural India, Shah said.
“The effects extend beyond individual sectors. A simpler tax structure, lower transaction costs and greater predictability can improve competitiveness, support investment and strengthen supply chains across manufacturing, financial services, real estate, hospitality and technology,” Shah said.
“As a result of the enhanced demand, we are making further investments to increase capacity across multiple businesses,” he added.