GST to dip, retail eyes festive sales surge buyers to have great bumper opportunity
Telegraph | 5 September 2025
The downward revision of Goods and Services Tax (GST) rates on small cars, motorbikes and household items has sparked optimism among retailers, who are hoping for a “bumper festive season” after a dull August.
The automobile sector, in particular, saw many prospective buyers delay purchases and await the GST revision, which was formally announced on Wednesday.
“Many customers have already selected their preferred models but haven’t paid the booking amount because they wanted to benefit from the GST reduction,” said a sales official from a major automobile company overseeing showrooms across Calcutta and eastern states. “Others paid token amounts but requested billing only after the new GST regime takes effect.”
The new GST slabs will take effect from September 22.
With rates now confirmed, customer activity is picking up. “Buyers want billing done after September 22. The festive season usually drives good sales, and we hope the GST revision will make it even better,” the automobile sales official added.
The GST Council on Wednesday introduced sweeping changes, streamlining it to just two slabs of 5% and 18% while providing relief on small cars, bikes and household items. Mid-size and large cars will face a 40% special GST, which will still be lower than the previous rate. Buyers are likely to benefit as the total tax incidence on them is expected to reduce owing to the withdrawal of cess from September 22 onwards.
Market watchers estimate that prices of large sedans, mid-sized SUVs and multi-purpose vehicles (MPVs) with capacity of less than 1500cc, are expected to reduce by about 3.5%. Prices of premium SUVs and MPVs with more than 1,500cc engines are estimated to fall by about 6.7%.
Despite the announced changes, consumer durables showrooms remained relatively quiet on Thursday. “Some people are making enquiries, but we’ll receive updated pricing for individual models in the coming days,” said an employee at a south Calcutta store.
Pulkit Baid, director of the Great Eastern Retail chain, anticipates a “solid festive season” but notes that the response has been measured.
“There’s no immediate rush following Wednesday’s announcement. If anything, people are staying away from the market for now. We expect a sales surge from September 22 through Dhanteras (October 18),” he said.
Baid draws on experience from a similar 2018 revision when GST on refrigerators, washing machines and mixer-grinders dropped from 28% to 18%. “We had hoped sales would skyrocket, but people buy durables when they need them, not just because prices fall. Even a 10 percentage point GST reduction won’t make someone buy a refrigerator they don’t need,” he reasoned.
An FMCG company official responsible for channel sales echoed this sentiment, not expecting immediate queues for air-conditioners and televisions. “But there’s strong potential for sustained growth because consumers will have more disposable income,” he said, requesting anonymity as he wasn’t an authorised spokesperson.
“Families who previously spent ₹50,000 might now get everything for ₹46,000. Whether that surplus goes toward discretionary spending remains to be seen, but we’re hopeful,” he added.
Auto dealers wait
Sales executives at automobile showrooms expect updated on-road prices and loan details within a week. Sandeep Gupta, co-owner of Celica Automobiles, which operates multiple showrooms selling four-wheelers, including Jeep vehicles and two-wheelers, welcomed the revision. “It will boost consumer sentiment,” Gupta said.
Akhil Agrawal, founder and managing director of Gajraj Hyundai, shares the optimism but highlights a potential challenge. With the competition cess on new cars also being removed from September 22, dealers may face “cess loss”.
“Dealers could struggle to utilise accumulated cess credits if vehicles are sold at the new, lower tax rates,” Agrawal said. These credits represent taxes already paid on inventory vehicles. Without clear government guidelines on the cess removal, dealers may be unable to recover these credits, potentially leading to financial losses.