GST restructure is a much-needed reform, says Maruti Chairman R C Bhargava

The small car segment in India is facing headwinds due to multiple reasons.

Welcoming the Union government's Goods and Services Tax (GST) rationalisation proposal, Maruti Suzuki India Chairman R C Bhargava said that it is a much-needed reform, being awaited by the entire nation.

"The announcement by the Prime Minister that the entire GST structure is being revamped is very welcome. It is a much-needed reform. I think the whole country was waiting for it," Maruti Suzuki Chairman R C Bhargava told Moneycontrol.

"The government needs to be congratulated for what they are doing. We have to wait till the GST Council decides on all the details of how this restructuring will be done, including what cars and others will carry as GST, and after that, only we will be able to give details on it," he added.

Introduced in July 2017, replacing several indirect taxes, GST currently acts as a unified tax structure across four slabs -- 5%, 12%, 18% and 28%. As part of the Centre's proposal to rationalise GST, the 12% and 28% slabs are expected to be removed, with only the 5% and 18% slabs being retained.

Also, the Indian government is expected to lower the tax on small cars and two-wheelers from the current 28% to 18%, making them relatively affordable. However, the luxury models might be placed in a new 40% bracket. The new GST structure is expected to be rolled out before Diwali.

For reference, all types of internal combustion engine vehicles, be it passenger vehicles (PVs), two-wheelers, three-wheelers or commercial vehicles (CVs), attract a GST of 28%. While electric vehicles (EVs) come under 5% slab, hydrogen fuel cell vehicles (FCEVs) are in the 12% slab. Then, there is also a compensation tax, depending on the vehicle category, ranging from nil to 22%.

On multiple occasions in the past, Bhargava has advocated tax revisions to boost the demand for small cars, which are facing headwinds owing to multiple reasons, including rising costs due to additional safety features and compliance with updated emission norms, price hikes on account of rising input costs, weak urban demand, shrinking first-time buyer base, rising popularity of bigger SUVs and competition from the used car market.

Maruti Suzuki India has the largest portfolio of small cars (sub-4 metre) in the country, including models like the Alto K10, S-Presso, Celerio, WagonR, Eeco, Ignis, Swift, Baleno, Dzire, Fronx, Brezza and Jimny.

The small car sales, excluding those of SUVs, of the company declined 6.78% year-on-year (y-o-y) at 10,32,179 units in FY25 from 11,07,248 units in FY24.

Among rivals, Hyundai Motor India sells small cars like the Grand i10 Nios, i20, Aura, Exter and Venue, while Tata Motors offers the Tiago, Altroz, Tigor, Punch and Nexon.