GST Cuts Fuel Auto Stocks: Tractors, Two-Wheelers, Small Cars Get Tax Relief M&M, Eicher Lead Rally

The Nifty Auto index surged over 2.2% in early trade on Thursday, led by index heavyweights Mahindra & Mahindra (M & M) and Eicher Motors, after India cleared tax rate revisions for the sector.

The GST Council on Wednesday approved a tax restructuring that simplifies the rates to just two slabs: 5% and 18%. The revised rates will come into effect from September 22.

For the automotive sector, this results in rate cuts across various segments, including motorcycles and hybrid cars.

GST Slashed

GST on petrol, petrol-hybrid, LPG, diesel, and diesel-hybrid cars with an engine capacity of up to 1500 cc and a length of up to 4000 mm, CNG cars up to 1200 cc and 4000 mm, and motorcycles up to 350 cc, has been reduced from 28% to 18%.

The majority of vehicle sales in the country fall under this category.

The tax on three-wheelers has also been reduced from 28% to 12% while GST on tractors has been cut from 12% to 5%.

GST has been increased to 40% for larger and premium passenger vehicles, covering petrol or hybrid cars above 1200cc or longer than 4,000 mm, diesel or hybrid cars above 1500cc or 4,000 mm, as well as motorcycles exceeding 350cc.

The council decided to retain the 5% GST rate on electric vehicles (EVs).

Imported armoured luxury sedans will be exempt from GST only in rare cases. For instance, vehicles brought in by the President's Secretariat will qualify under this rule.

Stocks Watch

Barring Ashok Leyland and Exide India, every stock on the Nifty Auto index was trading in the green.

M & M was up 6.7%, extending Wednesday's gains and rising for a third time in four sessions. The company is also expected to benefit from the GST cut in tractors to 5% from an earlier 12%, offering a much-needed respite for farmers. It was the top trending stock on Stocktwits. 

Eicher Motors rose 2.7% to ₹6,541.8. The company is best known for its Royal Enfield motorcycles, with the majority of sales coming from models under the 350cc category, including the Bullet, Classic, and Meteor.

Two-wheeler companies, including TVS Motor (+1.34%), Hero MotoCorp (+1%), and Bajaj Auto (+0.85%), were trading higher. Bajaj also manufactures KTM motorcycles in the 160cc, 200cc, 250cc, and 390cc categories.

Shares of Maruti Suzuki, India's largest car manufacturer, were up 0.52%. Tata Motors climbed 1.26% higher, while Hyundai India rose 1.34%.

In the EV space, Maruti trails rivals Tata Motors and Mahindra, both of which already offer multiple electric models. Maruti Suzuki entered the segment on Wednesday with the launch of its first all-electric car, the e-Vitara.

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