GST 2.0 Impact on Indian Automobile Industry: A Descriptive Analysis Using Secondary Data

Dr. Priyanka Jhamnani

GST 2.0, Automotive Industry, Tax Reform, India, Market Response, Descriptive Analysis

The Indian automotive sector, contributing 7.1% to national GDP, experienced prolonged stagnation between 2019 and 2024 due to prohibitive taxation. In September 2025, GST 2.0 restructured automotive taxes from 28% plus cess (up to 22%) to a simplified 18% for mass-market vehicles and 40% for premium segments. This descriptive analysis uses secondary data from SIAM, FADA, and corporate filings (September 2024-December 2025) to document post-reform market patterns without econometric testing. The four-month observation reveals substantial market reorientation coinciding with reform implementation. Passenger vehicle wholesales shifted from -8.8% year-on-year in August 2025 to +26.8% in December 2025. Geographic divergence emerged, with rural retail registrations growing 32.4% versus 22.9% urban growth, consistent with higher price elasticity in cost-sensitive segments. Mass-market categories benefiting from the 18% tax rate showed stronger expansion, while major OEMs maintained or expanded EBITDA margins above 13% despite price reductions, reflecting operating leverage from higher volumes. Dealer inventory normalized from stressed levels (53-55 days) to healthy ranges (37-39 days), validating demand authenticity. Three unintended consequences emerged: the EV tax advantage narrowed from 24 to 13 percentage points, coinciding with stagnating EV market share; stranded compensation cess credits created estimated INR2,500 crore in dealership working capital challenges; and the sharp 350cc threshold in two-wheelers created artificial market bifurcation affecting product design decisions.This analysis is bounded by a four-month window that captures immediate response but not long-term sustainability, concurrent favorable macroeconomic conditions (deflating inflation, rate cuts), and reliance on secondary sources without primary data collection. The study documents temporal associations without establishing causal relationships, providing baseline insights for future longitudinal research on GST 2.0's sustained impacts.

Volume 14 Issue 2, February-2026

Pages : g253-g267