**Executive Summary**
The document addresses Lok Sabha Starred Question No. 268, answered on December 18, 2025, regarding the impact of GST rationalization on the automobile sector. It details the effects of revised GST rates, effective from September 22, 2025, on vehicle registration, demand, and fleet modernization. The response to the question was laid on the Table of the House.
**Key Points / Main Content**
* **GST Rate Implementation and Vehicle Registration:**
* New GST rates took effect on September 22, 2025.
* Vehicle registrations increased by 29.1% in October 2025 compared to the previous year (excluding Telangana).
* **Impact on Vehicle Demand and Pricing:**
* Lower GST rates are expected to increase vehicle demand.
* Reduced on-road prices, financing costs, and road tax are encouraging for first-time and rural buyers.
* **Commercial Vehicle Segment:**
* GST rates for commercial vehicles reduced from 28% to 18%.
* This is expected to increase sales and accelerate fleet renewal.
* **Voluntary Vehicle Modernisation Program (VVMP):**
* The government provides a policy framework to encourage vehicle replacement.
* Includes state road tax concessions, waiver of registration fees, and manufacturer incentives for vehicle scrappage.
* Lower GST rates enhance the business case for fleet modernisation.
* **Impact on Public Transport and Logistics:**
* Fleet renewal is expected to improve public transport services in urban and rural areas.
* Increased vehicle availability and affordability should enhance logistics efficiency.
* This will reduce freight rates and overall transportation costs.
**Impact Analysis**
**Vehicle Manufacturers (SIAM)**
* **Impact:** Increased vehicle demand, especially for first-time and rural buyers, and commercial vehicles.
* **Action Required:** Respond to increased demand and adjust manufacturing/supply chain as needed. Consider providing incentives for scrappage programs.
**Transport Operators**
* **Impact:** Benefit from reduced GST rates on commercial vehicles, encouraging fleet modernization and improving the business case for fleet upgrades.
* **Action Required:** Consider fleet renewal and modernization efforts, leveraging the incentives and lower GST rates to improve efficiency and service.
**Consumers (First-Time and Rural Buyers)**
* **Impact:** Increased affordability of vehicles due to lower GST rates, financing costs and road tax.
* **Action Required:** Be aware of and leverage the reduced prices when purchasing vehicles.
**Government**
* **Impact:** Improved fleet renewal and vehicle modernisation, and improved public transport.
* **Action Required:** Ensure availability and continuity of Voluntary Vehicle Modernisation Program (VVMP).
Key Entities Referenced
Goods and Services Tax (GST): Refers to the recent rationalization of GST and its impact on the automobile sector.
Ministry of Road Transport and Highways: The ministry responsible for answering questions related to the impact of GST on the automobile sector.
Lok Sabha: The house where the starred question regarding the impact of GST rationalization was raised.
Voluntary Vehicle Modernisation Program (VVMP): A government program aimed at encouraging vehicle replacement through incentives.
GOVERNMENT OF INDIA
MINISTRY OF ROAD TRANSPORT AND HIGHWAYS
LOK SABHA
STARRED QUESTION NO. 268
ANSWERED ON 18th DECEMBER, 2025
IMPACT OF GST RATIONALISATION ON AUTOMOBILE SECTOR
*268. SHRI ASHISH DUBEY:
SHRI MITESHBHAI RAMESHBHAI PATEL:
Will the Minister of ROAD TRANSPORT AND HIGHWAYS
सड़क परिवहन औि िाजमार्ग मंत्री
be pleased to state:
(a) whether the Government has carried out any assessment of
the likely impact of the recent GST rationalisation on the
affordability of two-wheelers, passenger vehicles, tractors, buses
and commercial goods vehicles;
(b) if so, the details thereof;
(c) the likely impact of the revised GST structure on vehicle
demand, fleet renewal and the expansion of public transport
services across the urban and rural areas;
(d) whether any analysis has been made with regard to the
impact of the said changes on logistics efficiency, freight rates
and transport operating costs; and
(e) if so, the details thereof?
ANSWER
THE MINISTER OF ROAD TRANSPORT AND HIGHWAYS
(SHRI NITIN JAIRAM GADKARI)
(a) to (e) A statement is laid on the Table of the House.STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (e) OF THE
LOK SABHA STARRED QUESTION NO. *268 FOR ANSWER ON 18th
DECEMBER, 2025 ASKED BY SHRI ASHISH DUBEY AND SHRI
MITESHBHAI RAMESHBHAI PATEL REGARDING IMPACT OF GST
RATIONALISATION ON AUTOMOBILE SECTOR.
(a) & (b) The new GST rates came into effect from 22nd of
September 2025. As per data at Vahan portal, there has been 29.1%
increase in the total number of vehicles registered (except the State
of Telangana) in October 2025 vis-à-vis corresponding month of the
previous year.
(c) to (e) As per information received from Society of Indian
Automobile Manufacturers (SIAM), the vehicle demand is likely to raise
based on sales pattern of last 3 months as lower GST reduces on-road
prices of the vehicles, financing cost and road tax levied on the
vehicles which is encouraging for first time buyers and rural buyers
who are more price sensitive.
The commercial vehicle segment has also benefited significantly from
the reduction in GST rates from 28% to 18%. In addition to generating
incremental sales of new buses and trucks, this rationalisation is
expected to stimulate replacement-led demand, thereby accelerating
fleet renewal.
The Government through Voluntary Vehicle Modernisation Program
(VVMP) has already provided a policy framework to encourage vehicle
replacement, including state road tax concessions, waiver of
registration fees and automobile manufacturer-led incentives for the
purchase of new vehicles against the scrappage of old ones.
The additional impetus provided by lower GST rates further
strengthens the business case for transport operators to undertake
fleet modernisation.
This renewed focus on fleet renewal is also expected to contribute to
the expansion and improvement of public transport services across
both urban and rural areas, enhancing mobility, increase in logistic
efficiency and service reliability.
Increased movement of goods,driven by higher vehicle availability and
affordability, will further enhance logistics efficiency and contribute to
a reduction in freight rates, thereby lowering the overall transportation
cost.
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