GST reset: Micro SUVs, not small cars, set to 'gain most'

NEW DELHI: It will be the micro SUVs, and not the mini affordable cars, that are likely to be the big winners in govt's decision to cut GST on smaller vehicles, company officials and industry experts say.

While Maruti Suzuki, the biggest seller of mini cars in the country, is confident that hatchbacks will get a leg-up due to the lower taxes on the smaller cars, a large part of the industry feels that micro SUVs - which are priced pretty close to the traditional hatchbacks or even lower for certain variants - will emerge as the real winners.

The small car category, which govt has chosen for a lower GST rate of 18% against the current 28% (plus 1% cess on petrol version and 3% on diesel), currently comprises body styles such as hatchbacks (such as Maruti's Alto and Celerio, Renault's Kwid, Hyundai's Nios), mini SUVs (Tata's Punch, Maruti's Fronx, Hyundai's Exter), and sedans (Maruti's Dzire, Honda's Amaze). To qualify for the lowest-duty category, the models need to be under 4 meters in length with petrol engines under 1200cc or diesel under 1500cc.

Many experts believe that the consumers' love for 'SUV-shaped' cars, which offer a higher ground clearance and are relatively better designed with higher power aspects, will mean stronger sales for the vehicles.

Tarun Garg, COO of Hyundai India, said there will be "no change in buyer preference" as demand will likely 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."

The numbers bring out the trend much better. The share of hatchbacks to total car sales has slipped from a high of 50% in the year 2015 to a low of 22% (so far in 2025), while the share of SUVs in the same period has shot up from 13.5% to 54%.

Companies say the trend of SUV surge is visible across segments - from smaller SUVs, to premium ones (where models such as Hyundai Creta and Mahindra XUV7OO and Thar have taken control), to the luxury ones of 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 disagrees and feels that smaller cars will make a comeback. "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.