Maruti Suzuki bets on GST cut to breathe new life into the demand for small cars, kiss Trump rates

Maruti Suzuki, the largest car manufacturer in India, expects the proposed GST reforms to breathe new life into the demand for small cars, to support the growth in the wider automobile market and helping the impact of high American rates that are felt in some other sectors of the economy.

“My hope and my expectation is that we will see a revival of the small car market, overall faster faster growth industry, more industrial activities and a greater generation of employment opportunities,” said RC Bhargava, chairman, Maruti Suzuki, at the annual general meeting of the company. “I think all this is necessary in the current times in which the tariff problems create a difficult situation in other parts of the Indian economy.”

It reported earlier this month that the GST Council, the APEX decision-making body for the indirect tax, is planned to comply with 3-4 September, to discuss the levy on small cars to 18% of 28%.

Such a movement would in particular benefit lower consumers, according to Bhargava. “We hope that the proposal that the prime minister made (on August 15 from the red fort) will result in the GST on small cars that fall to 18%. But we have to wait until the official announcement has been made,” he said.

Small cars up to 4 meters and motorcycle capacity up to 1,200 cc over gasoline, CNG or LPG currently attract 28% GST and 1% CESS. Larger cars and SUVs are likely to be confronted with the special percentage of 40%, according to the proposal that will be taken over by the GST Council.

Currently, these vehicles attract 43-50% tax, including GST and Cess.bhargava that the pace of Maruti’s turnover growth and the capacity extensions would greatly decrease in the decision of the GST Council. Maruti Suzuki has an investment from RS 70,000 crore to double capacity, reinforcement of the infrastructure and the Bolster-R&D will reinforce in the next 5-6 years.

The sale of small cars that spread hatchbacks and compact sedans has been falling in India for several years. The total revenue growth of the industry of the passenger vehicles is exclusively powered by a strong SUV question.

The turnover of the compact car and hatchback fell by 13% to around a million units in FY25, less than half of those of the SUV turnover of approximately 2.35 million, showed data in the industry accessible by ET. SUV turnover rose by 10% in FY25. The share of small cars in the total PV market fell for the fifth consecutive year to a low of 23.4% in FY25. It also fell to 21% in the first four months of this tax year.

In general, the sale of passenger vehicles in the year year that 1.35 million units in April-Juli 2025, data from the Society or Indian Automobile Manufacturers (SIAM) fell.

Veterans from the industry granted the decrease in a leap of 30-40% in the prices of small cars in the last five years due to stricter safety and emission standards. Bhargava confirmed that the introduction of BS-6 standards had increased the vehicle costs in 2018-19, weigh on the sale of small cars and made it more difficult for owners of two wheels to upgrade to safer cars.

To tackle this affordability gap, Bhargava pointed to Japan’s experience with Kei cars in the 1950s. These were ultra-compact cars, designed with lighter safety regulations and lower loads, which scooter owners gave a cheap alternative to upgrade to four-wheelers. “I think India should consider something similar,” he said.

In general, Bhargava ruled that reducing GST on small cars will not only help consumers at the bottom of the market, but also enable the economic tension of American rates.

“We are all aware of the global uncertainty that has been caused in recent months. President Trump has forced to think about conventional policy and relationships, in particular the use of rates in diplomacy is seen for the first time. To be united at the moment,” he said.

Bhargava also pressed parity between electric and hybrid cars under the GST framework. “The load on electric cars and hybrid cars in Europe and the US is very similar,” he said. In India, electric cars are currently below 5% GST plate, while hybrid cars are charged 28%. “In India we believe that there is a need for technologies to be encouraged by the tax system, not only EV technology, but also any technology that leads to cleaner cars, reducing oil consumption, reducing pollution in the air and that leads us to Net Zero. All technologies, depending to the neat, said.

Bhargava’s risks marked by restrictions on rare earth magnets, and called it “both a warning signal”, although it adds that the problem can be solved soon. “Our government has concluded a milestone free trade agreement with the UK and this could be a template for future similarities,” he said.