GST exemption that caused spike in vehicle sales

The GST reduction announced by the Centre has reflected the most in the vehicle sales sector. There has been a huge jump in vehicle sales in the country. The GST on vehicles was reduced from 28 to 18 percent in October. This led to the record sales of e-vehicles in Kerala. 12,104 cars were sold in October alone. This was 6431 in 2024. An increase of 88.21 percent! When the prices of cars were reduced from Rs. 1.5 lakh to Rs. 50,000, the number of people buying vehicles increased, which led to the increase in sales. Another reason for the increase in sales was the spread of rumours that companies would soon be increasing the prices of cars.

This excellent response from the automobile sector also proves that the criticism that the reduction in GST would not bring about major changes in the manufacturing sector was wrong. The middle class saw the price reduction as an opportunity. Small cars and two-wheelers were the most sold, not luxury vehicles. Banks and other financial institutions made it easy to buy cars by providing loans, which increased the number of people coming forward to buy vehicles. The current estimate is that 25 percent of families in Kerala own their own vehicles. Earlier, there was only one vehicle per household. Today, even middle-class households have at least two cars.

Maruti Suzuki has announced price cuts of up to 24 percent, Tata Motors has announced price cuts of up to Rs 1.5 lakh and Mahindra has announced price cuts of up to Rs 1.56 lakh on various models. The removal of cess, which was up to 20 percent on large SUVs, is also a major reason for the price cuts. Premium SUVs now have only 40 percent GST, which is a reduction from the previous higher rate of 48%.

Maruti Suzuki India's total sales in November, including exports, stood at 2.29 lakh units. A 26 per cent increase compared to the previous November. Sales of small cars like the S-Presso, Alto, Celerio and WagonR rose by 37 per cent. Tata Motors and Mahindra & Mahindra reported 22% year-on-year growth in their passenger vehicle sales, Kia Motors saw a 24% increase, and Renault India experienced a 30% rise compared to November 2024.

A major challenge facing Kerala is that the condition of roads and parking facilities is not improving with the increasing number of vehicles. The incomplete construction of the national highway is making the issue worse. Despite the reduction in GST, a section of traders are not ready to reduce the prices of some small products. Steps should be taken by the GST department to resolve this.