GST Cut to Fuel 6% Growth for PV Industry in H2FY26: Maruti Suzuki

After a decline in the first half of this financial year, India’s largest car maker projects the domestic passenger vehicle industry wholesale volume to grow 6% during the second half of the financial year on a year-on-year basis with strong growth across all segments, including small and entry-level cars.

“The second half of this year [in terms of industry growth] will be substantially higher than the first half. Instead of a degrowth, the industry should see an overall growth of 6% or so in the second half of the year. It will be a big change from what was happening,” Maruti Suzuki Chairman RC Bhargava told reporters on Friday.

During the April-September period, domestic passenger vehicle sales declined 1.4% year-on-year to 2.05 million units, with a sharp 9% drop in August. The slowdown reflects weak demand for small cars and deferred purchases after Prime Minister Narendra Modi indicated on August 15 that GST rates on vehicles could be reduced in the coming months.

“The degrowth in the first half is not at all surprising. After August 15, a lot of customers stopped buying because they were waiting for the GST reforms to happen. So a little over one month of sales were lost. Also, the dealers had enough cars with them because customers were not lifting cars,” Bhargava explained.

However, with the new GST rates from September 22 and strong festival season demand, the industry has clocked record festival season sales this year. According the Vahan data, passenger vehicle registration rose 17% on year to 586,000 units between September 22 (start of Navratri) and October 22 (Diwali day).

The actual retail sales numbers between Navratri and Diwali will be higher, as there is a usual delay between a vehicle being sold at a dealership and its official registration being recorded in the government's Vahan portal. Also, the Vahan dataset does not include registration information from approximately 5% of RTOs nationwide.

Under the new GST structure, tax rate on small cars under four meters has been reduced to 18% from 28%, with the compensation cess fully removed. This, combined with discounts from automakers, has reignited demand in the market, particularly for entry-level cars and hatchbacks, which had long been under pressure due to the sharp rise in vehicle costs.

“We have around 350,000 pending bookings, out of which 250,000 bookings are in the 18% GST class. I am sure this heavy rate of growth, which we have witnessed [during the festival season], cannot be sustained. But I believe the small car segment [those taxed at 18%] can grow in double digits for some period,” Bhargava said.

At 6% growth rate in H2, passenger vehicle sales could grow to 2.35 million from 2.22 million units in the year-ago period. This could result in the full financial year 2026 volume hitting 4.40 million units, representing a growth of only 2.4% from 4.30 million units in FY2025. At the beginning of the year, the industry was projecting growth in low single digits.