Hero Moto, Maruti, Tata Motors and other auto stocks jump up to 8%. How a GST rate cut may impact them

Shares of auto majors, including Hero MotoCorp, Maruti Suzuki India, Ashok Leyland, TVS Motor, and Bajaj Auto jumped 5-8% on Monday morning on expectations that the GST rate may be reduced from 28% to 18%.

Currently, two-wheelers are taxed at 28%. Analysts see a high probability of the rate being cut to 18%. “All the listed 2W OEMs – Bajaj, Hero, TVS, and Eicher – should benefit from this cut. We see a low probability of differential GST between entry-level and premium 2Ws,” Jefferies said.

On the passenger vehicles side, small cars attract a tax of 29–31%, including compensation cess. Maruti Suzuki could, therefore, emerge as one of the biggest beneficiaries of a rate cut.

Jefferies noted that SUVs are currently taxed at 45–50%, a rate unlikely to come down.

“Hybrid vehicles attract a similar GST rate as ICE vehicles, compared with 5% for EVs. Any reduction in GST on hybrids could be positive for Maruti,” it said.

Commercial vehicles are also taxed at 28%, which could be cut to 18%. Ashok Leyland, followed by Tata Motors and Eicher, would be key beneficiaries of such a move, the brokerage said.

Brokerages highlighted that Prime Minister Narendra Modi’s Independence Day announcement on GST rationalisation and simplification is expected to accelerate consumption recovery. Over the past three years, consumption has been dented by high inflation and rising interest rates.

As part of the restructuring, the government is likely to propose a simplified two-slab GST system (5% and 18%) to replace the existing multi-tier structure (5%, 12%, 18%, 28%).