GST Could Slow the Pace of June Car Sales by 8 Percent

Demonetisation hit auto industry reduces production

Indian car industry expects 8% decline in sales in June 2017; could slow the pace of projected market growth in FY18

With Goods and Services Tax (GST) ready to be rolled out from 1st July, Indian car industry is expecting the car sales to decline by 8% and therefore slowing the pace of projected market growth in FY18. As the dealers are refusing to stock up until 1st July, the local car sales could face a significant fall in number in June 2017.

With the demand for the models that come with longer waiting period may mitigate the decline, the overall industry is likely to be impacted by a sales fall between 5% and 8%. Not only the dealers are refusing to stock vehicles, but manufacturers are also restricting shipping cars to the dealers fearing losing out on tax credits.


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One of the reasons behind the expected decline in sales is that there is no provision for government refunding central sales tax, infra cess and national calamity contingent duty on the unsold stocks beyond 1st July, even if the government has made provisions for refunding excise duty beyond that date. There are around 3 lakh vehicles waiting to be sold and considering the financial impact ahead, manufacturers are offering great discounts on its cars to clear the stocks by 30th June.

GST is going to be the biggest tax reform after independence and with this new tax structure, entire country will follow a single system. There are four tax slabs, 5%, 12%, 18% and 28%. Interestingly, with under the new tax structure, smaller cars will see marginal price hike, while the bigger and luxury cars will see price dropping.


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While the small mass market products are about become little pricier after GST rolls out, auto manufacturers are not that much worried about the impact as sales after GST is unlikely to slow down. Also, the SUVs and bigger luxury cars are expected to see more demand with decreasing price.