GST rate change: Expediting clarity essential, speculation impacting new vehicle sales, says BMW

BMW Group India President and CEO Hardeep Singh Brar.

The government needs to expedite clarity on Goods and Services Tax (GST) rates as its decision to restructure the levy has resulted in uncertainty among buyers, which is impacting new vehicle sales, according to BMW Group India President and CEO Hardeep Singh Brar.

On August 21, the Group of Ministers (GoM) approved the Centre's GST rationalisation proposal. The details regarding the new tax structure will be known following the GST Council meeting on September 3 and 4.

The GST structure, at present, has four slabs -- 5%, 12%, 18% and 28%. As part of the restructuring, the 12% and 28% slabs will be removed, and the 5% and 18% slabs will be retained. Also, a new 40% slab will be introduced for sin and luxury goods.

All internal combustion engine (ICE) cars attract a GST of 28%. Depending on the body-style, length, type of engine and engine capacity, a compensation cess, ranging from 1% to 22% is also levied. Hence, the total tax on such models can be from 29% to 50%. The electric vehicles (EVs) come under the 5% GST slab with the compensation cess being nil.

On ICE two-wheelers, a GST of 28% is levied. The compensation cess is nil on models with an engine capacity of up to 350cc and 3% on those having an engine capacity of over 350cc.

The ex-showroom price of any vehicle, be it a car or a two-wheeler, is inclusive of GST and compensation cess. A reduction in GST, from 28% to 18%, will directly bring down the ex-showroom price, and consequently, the on-the-road price. However, at this stage, it is unclear whether the compensation cess will be removed or retained.

For luxury cars, the total tax ranges from 45% to 50%. These models are expected to be brought under the new 40% GST slab. But several states have already raised concerns regarding the loss of revenue from such a move.

While two-wheelers with an engine capacity of up to 350cc are expected to enter the lower 18% GST slab, multiple sources have told Moneycontrol that the government is contemplating placing the two-wheelers having an engine capacity of over 350cc in the new 40% GST slab.

BMW Group India sells luxury cars as well as two-wheelers in the country. The company posted its highest-ever first-half car deliveries at 7,774 units (7,477 units of BMW and 297 units of MINI) in H1 2025, while the two-wheeler sales via BMW Motorrad stood at 2,569 units during the period.

"The recent speculation about the change in GST rates has caused uncertainty in the minds of consumers. Consumer interest and demand are strong, but they have adopted a wait-and-watch approach, and this delayed decision-making is impacting new vehicle sales at a certain level. Expediting clarity on GST rates is essential to get back to speed and ensure the auto sector's contribution to economic growth during this quarter is robust," Brar said in an official statement.

However, Brar did not reveal how much has been the impact of the government's GST rationalisation move on BMW Group India's volumes.

"We also hope that the sustainable push towards electric cars will continue to be encouraged as a priority and will reflect in the GST strategy by retaining the existing 5% GST on all passenger electric vehicles," he added.

BMW Group India recently crossed the electric car sales milestone of 5,000 units, becoming the first luxury brand in the country to do so.

"BMW Group India has been an early proponent of e-mobility in India, strategically investing towards expansion and localisation of electric product portfolio. An adverse impact from GST rates can derail the vision of high electric adoption and local production in India," Brar observed.

Brar was recently appointed as BMW Group India's President and CEO, succeeding Vikram Pawah, who will now take charge as CEO of BMW Group Australia and New Zealand.