Maruti Suzuki India is optimistic about a significant boost in small car sales following the revision of GST rates by the government. The company projects a double-digit growth in the segment, with expectations shifting from a decline of 6% to a growth of 10%.

At the NDTV GST Conclave on Tuesday, Maruti Suzuki’s executive director, Rahul Bharti, hailed the GST revision as a “gift” to consumers. The company confirmed it would pass on the full benefit of the tax reduction to its customers.

Finance Minister Nirmala Sitharaman also praised Maruti Suzuki’s commitment to its customers, stressing that this was the spirit manufacturers should adopt.

Key Changes in GST Taxation

The GST Council’s recent decision has been seen as a bold reform in the automotive industry. Small cars, defined as vehicles under 4 meters in length with engine capacities up to 1200-cc for petrol and 1500-cc for diesel, will now be taxed at 18% GST, down from the previous rate of 28% GST plus an additional cess of 1-3%.

On the other hand, larger vehicles such as sedans, SUVs, and luxury cars, which were previously taxed at 28% GST with an additional cess of up to 22%, will now face a higher GST rate of 40%. The new tax structure is set to be implemented from September 22, and several car manufacturers have already started announcing the benefits consumers can expect.

Maruti Suzuki’s Growth Expectations

Maruti Suzuki, which has seen a decline in the small car market in recent years, believes the GST reforms will revitalize the segment. Bharti explained that small cars had been facing structural issues, but with the new tax cuts, the company expects a shift from a -6% decline to a 10% growth.

“After GST reforms, our initial projection suggests a swing from -6 to +10% growth. We may be surprised positively,” Bharti said. Maruti Suzuki is preparing for the anticipated surge in demand by accelerating work on new plants and increasing investments.

Investment Plans and Capital Expenditure

Buoyed by the positive market sentiment, Maruti Suzuki is revisiting its investment plans. Bharti emphasized the need to be proactive in response to the expected demand surge, stating that the company may need to increase its capital expenditure to meet the growing demand.

“We might have to increase our capital expenditure because the demand surge might come. We want to be on the right side of the consumer and start producing,” Bharti added.

Finance Minister Nirmala Sitharaman also expressed her appreciation for Maruti Suzuki’s decision to pass on the tax reduction benefits directly to consumers. She noted that the market had been eagerly awaiting the GST Council’s decision and that the anticipated rise in demand was encouraging for the industry.

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