Amid growing concern over the declining momentum in India’s automobile industry, the Chamber of Industrial & Commercial Undertakings (CICU) has formally appealed to Prime Minister Narendra Modi to expedite the implementation of revised Goods and Services Tax (GST) rates on automobiles and two-wheelers.

In its letter addressed to the Prime Minister’s Office, CICU urged that the proposed GST reforms, which would reduce GST on small cars and two-wheelers from 28% to 18% , be rolled out immediately, preferably before September 1st , 2025, to ensure consumer confidence and restore demand ahead of the upcoming festive season, including Navratri and Diwali.

 As the Government of India mulls over next-generation GST reforms that would simplify the current four-slab structure into a two-tier system, industry players have reported a sharp drop in customer enquiries and retail sales. The anticipation of lower prices has led many buyers to postpone their vehicle purchases, causing a temporary but significant demand freeze.

 Under the proposal, vehicles with engine capacities under 350cc, typically affordable small cars and commuter two-wheelers, would fall under the 18% GST bracket, potentially reducing on-road prices by 8–10%. High-end SUVs and luxury vehicles, on the other hand, would face a steeper tax burden of up to 40%.

 CICU President Upkar Singh Ahuja Warns of Looming Industry Disruption

Speaking on behalf of thousands of businesses linked to the automotive value chain, CICU President Upkar Singh Ahuja emphasized the urgency of policy action to prevent irreversible damage during a make-or-break quarter for the sector.

 “The auto sector supports millions of livelihoods — from dealerships and MSMEs to logistics and finance. Enquiries and sales have slipped into double-digit negatives across several segments since the GST discussion surfaced. If the revised rates are not implemented soon, we risk a complete festive season washout,” said Ahuja.

 He added that the cascading impact would hit the small manufacturers and suppliers the hardest, leading to production instability, working capital pressure, and potential job losses.

“Timely rollout is not just about boosting demand. It’s about protecting India’s MSMEs, stabilizing supply chains, and safeguarding employment,” Ahuja noted.

 Why immediate GST clarity matters to the auto ecosystem ? 

CICU’s analysis highlights multiple risks of delayed implementation which include :-

Customer Uncertainty: With potential savings on the horizon, buyers are delaying decisions, causing footfall and bookings to plummet.

Inventory Risk: Dealers and small suppliers face holding costs and price protection dilemmas as unsold stock accumulates.

Production Disruption: Original Equipment Manufacturers (OEMs) are throttling dispatches to avoid pricing issues post-GST revision, affecting downstream vendors.

If implemented promptly, the revised GST could offer meaningful relief for middle-class families, particularly in Tier-2 and Tier-3 cities where two-wheelers and entry-level cars dominate sales. Benefits include:

Lower Vehicle Prices: Reduction in ex-showroom prices could directly lower insurance, registration, and loan EMIs.

Upgrades Made Affordable: Families may now consider safer, better-equipped variants or shift from two-wheelers to entry-level cars.

Boost to Mobility: Affordable pricing increases access to personal transport, especially in semi-urban regions.

CICU’s Key Recommendations to the Government:

According CICU President Ahuja, "Government should immediately notify, revised GST rates before September 1, 2025, to capture pre-Diwali demand. Clarity on Compensation Cess and transition provisions should be given at the earliest to support dealers and prevent pricing disputes. Besides this government should plan financial safeguards for MSMEs via short-term interest subvention or guarantee schemes to support liquidity during transition. Lastly nationwide communication guidelines should be made and spread to ensure dealerships update pricing uniformly and transparently"

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