GST Bachat Utsav: Tax Cuts Drive Relief in Automobile Sector

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GST Bachat Utsav: Tax Cuts Drive Relief in Automobile Sector

Analysis

1. Event Overview
   • The GST Bachat Utsav began on 22nd September, marking the launch of next-generation GST reforms aimed at providing direct relief to citizens and industries.
   • The automobile sector has been among the biggest beneficiaries of the recent GST rate cuts, which aim to stimulate demand, reduce costs, and encourage sustainable mobility across India.
2. Key GST Reductions in the Automobile Sector
   • Two-Wheelers:
     • Vehicles up to 350 cc: GST reduced from 28% to 18%.
     • Impact: Makes bikes and scooters more affordable for middle-class and rural consumers.
   • Public Transport Vehicles:
     • Buses and minibuses with a seating capacity of more than 10 persons: GST reduced from 28% to 18%.
     • Impact: Encourages investment in public transport infrastructure and reduces commuting costs.
   • Cars:
     • Petrol cars under 1200 cc and diesel cars under 1500 cc: GST reduced from 28% to 18%.
     • Impact: Boosts demand for compact and fuel-efficient vehicles, making personal transport more accessible.
3. Public Response and Economic Impact
   • Consumers have reported significant savings — for instance, car buyers like Sandeep Kulkarni noted saving ₹1 lakh on a new vehicle purchase after the tax cuts.
   • These reforms are expected to:
     • Revive automobile sales, especially in the post-pandemic slowdown phase.
     • Support manufacturers through higher demand and improved cash flows.
     • Reduce inflationary pressures in the transport and logistics sector.
4. Policy Objective
   • The GST 2.0 reforms align with the government’s broader aim to:
     • Enhance ease of doing business.
     • Promote sustainable and affordable mobility.
     • Simplify tax compliance and create a more equitable taxation framework.

Static & Conceptual Background

1. About GST (Goods and Services Tax)
   • Launched: 1st July 2017.
   • Objective: To create a unified indirect tax system replacing multiple central and state taxes (like excise duty, VAT, and service tax).
   • Governing Body: GST Council, chaired by the Union Finance Minister.
   • Structure:
     • CGST: Central Goods and Services Tax.
     • SGST: State Goods and Services Tax.
     • IGST: Integrated Goods and Services Tax (for inter-state trade).
2. GST Council Composition
   • Chairperson: Union Finance Minister.
   • Members: Minister of State for Finance and Finance Ministers of all States and Union Territories.
   • Decision-making: Usually based on consensus or 75% majority of weighted votes (Centre 1/3, States 2/3).
3. Importance of GST Rate Rationalization
   • Periodic rate rationalizationhelps:
     • Boost consumption by making goods more affordable.
     • Encourage compliance and curb tax evasion.
     • Enhance sectoral competitiveness, especially in manufacturing-heavy industries like automobiles.
   • The GST Bachat Utsav symbolizes the government’s effort to make GST more citizen-centric and industry-friendly.
4. Economic Significance of the Automobile Sector
   • Contributes around 7% to India’s GDP and 40% to the manufacturing GDP.
   • Provides direct and indirect employment to over 3 crore people.
   • Acts as a multiplier sector — growth in automobile demand boosts steel, rubber, glass, and petroleum industries.
     
     Updated -  October 26, 2025 8:05 PM | News On Air