GST 2.0 poised to lift Indian auto sector in H2 FY26
The Indian car industry is steering toward a brighter second half of the fiscal year, with expectations of nearly 6% year-on-year growth in H2 FY26. The forecast comes as leaders in the sector, including Maruti Suzuki, flag the positive impact of GST 2.0 reforms on vehicle demand, supply chains, and overall industry sentiment. While the first half of the year showed muted performance, executives are optimistic that policy reforms will unlock pent-up demand and stabilize the market.
What GST 2.0 promises for automakers
GST 2.0 is designed to simplify tax administration, reduce compliance costs, and address some long-standing friction points in the automotive value chain. For manufacturers, the reforms are expected to improve cash flows, shorten the inventory cycle, and lower the effective tax burden on certain categories of vehicles and components. Industry observers say these changes could translate into more affordable vehicles for consumers and a more predictable production pipeline for factories.
Demand drivers align with policy changes
Maruti Suzuki and other players note that consumer sentiment is gradually improving as inflation pressures ease and real incomes recover. A lower effective tax rate on specific segments, along with faster refunds and smoother input credit mechanisms, could stimulate household spending on mid-range cars and SUVs. In addition to consumer demand, fleet renewal programs and rural penetration are expected to contribute to the observed uptick in sales during the latter half of FY26.
R C Bhargava’s view: leadership perspective on the forecast
R C Bhargava, chairman of Maruti Suzuki, underscored the role of GST reforms in shaping the near-term trajectory for the auto industry. While acknowledging the challenges of the first half, Bhargava emphasized that policy clarity and smoother tax administration can create a favorable operating environment for manufacturers and dealers alike. He noted that GST 2.0’s cumulative benefits would gradually materialize as the market adapts to the updated tax framework.
Operational resilience and the supply chain
Industry executives also highlighted how GST 2.0 could strengthen the supply chain by improving input tax credits for auto components and easing cross-state logistics. A more cohesive tax regime helps reduce working-capital needs and can lead to tighter, more efficient production schedules. For a sector that relies on complex supplier networks, tax reforms that streamline compliance are seen as a critical enabler of sustained growth.
What the market should watch in H2 FY26
Analysts say the 6% growth target hinges on several factors: consumer affordability, stabilizing fuel prices, and continued policy support. Seasonal demand, new model introductions, and favorable financing conditions will also play a role in whether the growth momentum translates into a steady recovery for both manufacturers and dealerships. The auto sector’s performance in H2 FY26 could provide a template for how GST reforms influence manufacturing, retail, and regional market dynamics in the longer term.
Conclusion: a turning point for the auto sector?
As India’s auto industry navigates a post-pandemic landscape, GST 2.0 emerges as a potential catalyst for renewed growth. With leaders like R C Bhargava signaling cautious optimism, stakeholders will be monitoring tax policy implementation, consumer demand signals, and the health of supply chains to determine whether the 6% y-o-y target becomes a sustainable narrative for FY26 and beyond.
