The sharp reduction in tax rates following the rollout of GST 2.0 a year ago has driven an almost 20% surge in auto sales with passenger vehicle (PV) demand hitting new highs almost every month. The buoyant market has also prompted several original equipment manufacturers (OEMs) to reassess their India plans and accelerate capital expenditure.
Maruti Suzuki (MSIL) MD and CEO Hisashi Takeuchi said that PV sales for them grew about 36% year-on-year during Apr-Aug 2026 and within that entry segment grew by over 96%, where improved affordability has brought mobility closer to many more people. He added that encouraged by this growth, MSIL is accelerating its capex plans, which in turn will create a multiplier effect across the economy.
“This demonstrates the power of the Indian consumer and the importance of affordability. When domestic industry catches scale and competitiveness, more global business automatically shifts to us, leading to more exports,” added Takeuchi.
Anish Shah, Group CEO & MD, Mahindra Group said that since the GST rationalisation, SUVs have grown 17%, while LCVs and tractors have grown 20%. In Mahindra Finance, GST 2.0 improved vehicle affordability and demand, driving higher disbursements, while stronger customer cash flows are supporting healthier repayments. Mahindra’s hospitality, real estate and logistics businesses also registered sharp growth in business.
“As a result of the enhanced demand, we are making further investments to increase capacity across multiple businesses. GST 2.0 demonstrates how structural reforms, when combined with strong consumer demand and business investment, can create a virtuous cycle of affordability, consumption, investment and growth,” added Shah.
Tarun Garg, MD & CEO at Hyundai Motor India, said that since GST 2.0 implementation a year ago, the 4 lakh-unit monthly wholesale mark is the new normal, reflecting the sector's robust growth trajectory. “The passenger vehicle industry has recorded a YOY growth of 15% plus during September 2025-March 2026 and 29% plus during April-August FY2026-27 clearly demonstrating the strong impact of these reforms,” added Garg.
FADA President Sai Giridhar said that in the eleven months since GST 2.0 took effect (October 2025 to August 2026), Indian auto retail has registered over 3 crore vehicles, growing nearly 20% year-on-year, against under 5% in the comparable year before the reform. In a single stroke, GST 2.0 quadrupled the industry's pace of growth.
“In this one year, the industry has posted its best-ever months across categories; two-wheelers, the truest barometer of mass India, have reclaimed a peak last seen in 2018; alternative fuels have, for the first time in history, overtaken petrol in passenger vehicles; and rural Bharat has begun to outpace urban India across the board,” added Giridhar.
GST 2.0 was rolled out on September 22, 2025, to overhaul India's indirect taxation by compressing multi-tier tax brackets into a simplified structure (primarily 5% and 18%, with 40% for luxury and sin goods) to boost consumer demand and ease business compliance. The GST Council reduced tax rates on most auto segments to 18% from 28%. For SUVs longer than four metres, the GST rate was lowered to 40% (excluding cess) from the earlier 43–50% range.
