GST rate reset may hand micro SUVs a lead

It will be the micro SUVs, and not the mini affordable cars, that are likely to benefit the most from the government’s decision to cut GST on smaller vehicles, ToI reported citing company officials and industry experts.

While Maruti Suzuki, the country’s biggest seller of mini cars, is confident that hatchbacks will get a boost from the lower tax on small cars, much of the industry believes micro SUVs — which are priced close to hatchbacks, and in some cases even lower for certain variants — will emerge as the real winners.

The government has reduced GST on the small car category to 18% from the current 28% (plus 1% cess on petrol versions and 3% on diesel). This category covers models under four metres in length with petrol engines below 1200cc or diesel engines below 1500cc. Vehicles included range from hatchbacks such as Maruti’s Alto and Celerio, Renault’s Kwid and Hyundai’s Nios, to mini SUVs such as Tata’s Punch, Maruti’s Fronx and Hyundai’s Exter, as well as sedans like Maruti’s Dzire and Honda’s Amaze.

Industry experts say the strong preference for SUV-shaped models, with higher ground clearance, more features and stronger styling, will mean the advantage of the tax cut will flow more towards micro SUVs.

Tarun Garg, COO of Hyundai India, told ToI there will be “no change in buyer preference” as demand will peak for smaller SUVs. “People want SUV styling, higher ground clearance, and features like sunroof and six airbags. The new smaller SUVs look good, they have better features, and come nearly at the same price as that of hatchbacks. So they will be the winners, though some new customers will also go for the base variants in the hatch segment.”

Sales data already show the trend. The share of hatchbacks in total car sales has fallen from 50% in 2015 to just 22% so far in 2025, while SUVs have grown from 13.5% to 54% in the same period.

Companies say the SUV surge is visible across the board — from smaller models to premium SUVs such as Hyundai’s Creta and Mahindra’s XUV7OO and Thar, to luxury vehicles from BMW and Mercedes-Benz. “It will be no different in smaller cars with demand expected to shoot up for models such as Tata Punch and Maruti Fronx which will become highly attractive post the GST price cuts,” an analyst said.

However, Maruti Suzuki does not agree that SUVs will sweep the benefit alone. “We believe that against a decline of 6%, the mini and hatchback segment cars will grow by 10% after the GST cuts,” Partho Banerjee, senior executive officer (marketing & sales) at Maruti Suzuki, said.