Nomura has said that a reduction in goods and services tax (GST) on automobiles is highly likely after the Group of Ministers (GoM) approved a proposal recommending lower tax rates across categories. The brokerage said the move could deliver a major boost for original equipment manufacturers (OEMs) such as Mahindra & Mahindra, Maruti Suzuki, Ashok Leyland, and TVS Motor, as well as for component makers and tyre companies.
According to the proposal, GST on small cars and two-wheelers may be cut from 28% to 18%, while the rate on large cars could be reduced to 40%. For tractors, GST could fall from 12% to 5%, which would significantly improve affordability in rural markets. Nomura said the move is expected to drive strong demand recovery for passenger vehicles, commercial vehicles, and two-wheelers.
Suppliers such as Uno Minda, Motherson Sumi, Sansera Engineering, and Ceat are also expected to benefit from stronger OEM demand, the brokerage added. Nomura described the GST proposal as a structural positive for the automobile sector, likely to accelerate both volume growth and profitability in the medium term.
Disclaimer: The views and recommendations made in this article are those of Nomura. This article does not constitute investment advice. Investors should consult their financial advisors before making any investment decisions.
