Maruti Suzuki India shares gain the most in nearly five years; Here’s how a GST rate cut helps

Shares of Maruti Suzuki India Ltd. gained as much as 8% on Monday, August 18, on hopes of a potential GST rate rationalisation. This is the biggest single-day gain that the stock has seen in the last five years.Sources have told CNBC-TV18 that for four-wheeler manufacturers, there is likely to be two categories of rates.

While rates on cars below 1,200 cc are likely to be cut to 18% from 28% earlier, while a similar proposal is being put forth for Hybrid passenger vehicles of up to 4m and up to 1,200 cc petrol engine and up to 1,500 cc diesel engine.

Small cars currently attract 28% GST, along with a small cess rate between 1% and 3%.While most of the sales of India’s largest passenger car manufacturer are from the below 1,200 cc category, most of Maruti’s vehicles above the 1,200 cc engines, fall into the hybrid category.
Brokerage firm Morgan Stanley wrote in its note that Autos form 14% of the overall GST collection and a large part of the 28% tax bracket.In went back to 2008, where a combination of rate cuts and the sixth-pay commission had triggered a 20% increase in automobile demand.

Maruti and M&M are likely to be the biggest beneficiaries within the passenger vehicle segment, according to Morgan Stanley.

Nomura also highlights Maruti and M&M to be the key passenger vehicle beneficiaries in case of a GST rate rationalisation.

It believes that in case GST on cars is lowered by 10%, it could increase demand between 15% to 20% for automobiles.

Out of the 46 analysts that have coverage on Maruti Suzuki, 36 of them have a “buy” rating on the stock, eight say “hold”, while two have a “sell” rating.

Shares of Maruti Suzuki India are trading 7.3% higher currently at ₹13,884. The stock has risen 24% so far in 2025.