From Implementation to Rate Reduction: A Review of GST’s Impact on the Indian Automobile Sector in India

R Raghu Veer

doi:10.36948/ijfmr.2026.v08i01.68139

From Implementation to Rate Reduction: A Review of GST’s Impact on the Indian Automobile Sector in India

Author(s)	Dr. R Raghu Veer
Country	India
Abstract	The Goods and Services Tax (GST) represent one of the most significant indirect tax reforms in India, fundamentally restructuring the country’s fragmented taxation system. The Indian automobile sector, a major contributor to industrial output, employment, and tax revenue, has experienced notable changes following GST implementation and subsequent rate rationalisation. This study reviews secondary data to analyse the evolving impact of GST on the Indian automobile sector, with particular focus on the transition from initial implementation to later rate reductions. Using data from government reports, GST Council notifications, industry associations such as SIAM and FADA, and published empirical studies, the paper examines GST’s effects on vehicle pricing, demand patterns, sales performance, and supply chain efficiency across key segments including two-wheelers, passenger vehicles, commercial vehicles, and three-wheelers. The review indicates that the initial phase of GST delivered structural benefits such as tax uniformity, improved logistics efficiency, and reduced cascading effects, but higher effective tax rates limited immediate demand growth. Subsequent GST rate reductions marked a critical turning point for the sector. Lower tax rates led to reduced ex-showroom prices, improved affordability, and gradual recovery in vehicle sales, particularly in price-sensitive segments. The findings highlight the high price elasticity of demand in the Indian automobile market and the importance of fiscal policy responsiveness in stimulating consumption. Overall, the study concludes that GST’s impact on the automobile sector evolved over time, shifting from a compliance-driven reform to a demand-supportive policy instrument. The review provides insights for policymakers and industry stakeholders navigating India’s tax regime.
Keywords	Goods and Services Tax (GST); Indian Automobile Sector; Tax Rationalisation; Vehicle Demand; Fiscal Policy.
Field	Business Administration
Published In	Volume 8, Issue 1, January-February 2026
Published On	2026-02-05
DOI	https://doi.org/10.36948/ijfmr.2026.v08i01.68139
Short DOI	https://doi.org/hbnrqz

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From Implementation to Rate Reduction: A Review of GST’s Impact on the Indian Automobile Sector in India

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