Car industry poised for 6% growth in H2 FY26 on GST 2.0 boost: Maruti Suzuki Chairman R C Bhargava

The new GST structure was rolled out on September 22.

After a muted performance in the first half of the current fiscal, the car industry could witness a substantial growth of almost 6% year-on-year (y-o-y) in the second half owing to the Goods and Services Tax (GST) reforms, according to Maruti Suzuki India Chairman R C Bhargava.

The passenger vehicle (PV) volumes dropped 1.44% y-o-y to 20,51,082 units in H1 FY26 from 20,81,143 units in the same period last year. For reference, the domestic wholesales stood at 43,01,848 units for the entire FY25, with volumes of 22,20,705 units in the second half.

Replying to a question on the industry performance in H2 from Moneycontrol during Maruti Suzuki's Q2 FY26 earnings conference call, Bhargava said: "The de-growth in the first half (of FY26) is not at all surprising. After August 15, a lot of customers stopped buying cars as they were waiting for the GST reforms to happen. So a little over one month of wholesales were lost."

"The dealers had enough cars with them because customers were not lifting cars. And in any case, sending cars to dealers, the bigger cars, had a problem because of the compensation cess and therefore, sales dropped," he added.

Ahead of the rollout of the revised GST framework on September 22, both wholesale and retail operations remained subdued for more than a month as automakers adjusted dispatches to dealers and customers postponed purchases.

However, the implementation of GST 2.0 coincided with the opening day of the nine-day Navaratri festival, resulting in record sales on September 22. Maruti Suzuki delivered nearly 30,000 vehicles, Hyundai Motor India registered about 11,000 dealer billings, and Tata Motors completed close to 10,000 deliveries.

As per the new GST structure, smaller vehicles (sub-4 metre models) are now taxed at 18%, with the cess on automobiles completely withdrawn. Previously, these models attracted a 28% GST along with a 1-3% cess, leading to a total tax incidence of 29-31%.

Larger and premium models now fall under the 40% tax bracket, compared with the earlier effective rate of 43-50% under GST 1.0, which comprised 28% GST plus a 15-22% cess.

"I believe the second half of this year will be substantially bigger than the first half in the sense that instead of a de-growth of 1.4%, I think just for the second half, the industry should see an overall growth of 6% or so. It will be a big change from what was happening," Bhargava said.

He said that inquiries for Maruti Suzuki cars continue to be strong. The carmaker currently has 3,50,000 bookings, out of which 2,50,000 are for the models in the 18% GST bracket.

"I am sure this high rate of growth that we have witnessed cannot sustain. But I also expect that in the small car segment, which means the 18% GST segment, the double-digit growth should be possible for some period to come in the future," Bhargava observed.

Maruti's entry-level models, such as the Alto K10, S-Presso, WagonR and Celerio, are among the biggest beneficiaries of the GST restructuring. According to the carmaker, these models had a cumulative share of 16.7% in its total retail sales in the pre-GST 2.0 era, from April to September. However, their contribution has improved to 20.5% in GST 2.0.