Shares of automobile makers such as Hero MotoCorp, Maruti Suzuki, Bajaj Auto, M&M and Tata Motors jumped up to 8 percent on Monday, August 18, after reports of a likely GST cut on entry-level two-wheelers, compact cars and hybrids. Hero MotoCorp was the star performer, rallying more than 8 percent to emerge as the top gainer on the Nifty.
The move, reported by CNBC-TV18 citing sources, is part of the government’s push towards a two-tier GST regime — an idea highlighted by Prime Minister Narendra Modi in his Independence Day speech. The rejig, expected by Diwali, seeks to simplify the tax system and ease costs for middle-income households.
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Currently, vehicles are taxed under multiple slabs combining GST and cess, depending on engine size, length and ground clearance. The government is now weighing a flat 18 percent levy on mass-market vehicles. This would bring two-wheelers under 350cc, small cars up to 1,200cc, and certain hybrids down sharply from the prevailing 28–31 percent range, while luxury cars and SUVs would continue to attract the top 40 percent bracket.
Brokerages see widespread benefits across the auto value chain if the proposal goes through. Morgan Stanley noted that Hero MotoCorp and Eicher Motors stand to gain the most among two-wheelers, with Maruti Suzuki and M&M emerging as key beneficiaries in passenger vehicles.
Emkay added that Hero MotoCorp, with a dominant 79 percent share in entry-level two-wheelers, and TVS Motor, which has a 25 percent share in scooters, would be at the forefront of gains. Ancillary suppliers with heavy exposure to two-wheelers, such as Pricol, Sandhar Technologies and ASK Automotive, could also benefit.
Motilal Oswal, meanwhile, highlighted that both Maruti Suzuki and Tata Motors, with their passenger vehicles currently in the 28 percent slab, would see significant relief if the GST is brought down to 18 percent.
At around 9:20 am, the Nifty Auto index was trading at 24,958, up 3.5 percent, with Maruti Suzuki, M&M, Hero MotoCorp, Bajaj Auto, TVS Motor Company and Tata Motors among the top gainers.
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