Jamshyd Godrej: GST Long Overdue, Initial Rollout Had Too Many Rates

Jamshyd Godrej, MD of Godrej & Boyce, believes the Goods and Services Tax (GST) was long overdue and welcomes progress made despite initial challenges with too many rates. He emphasizes the need for resilience in the face of global disruptions and praises the Visionary Leaders for Manufacturing (VLFM) program for its role in nurturing leaders to transform India into a global manufacturing hub.

The introduction of new Goods and Services Tax (GST) rates and slabs by the Ministry of Heavy Industries is set to have a significant impact on various sectors, particularly heavy industries and the automobile sector. The new rates, announced on September 8, 2025, aim to boost demand and support the growth of these sectors, which are crucial for India's economy.

Impact on Automobile Sector

The automobile sector, which includes bikes, buses, small and luxury cars, tractors, and auto parts, will see substantial benefits from the GST rate cuts. Lower GST rates will push demand, helping automobile manufacturers and the large ancillary industry (tyres, batteries, components, glass, steel, plastics, electronics, etc.) [1]. The entire auto industry, directly and indirectly, supports over 3.5 crore jobs in manufacturing, sales, financing, maintenance, etc. A demand boost will lead to new hiring in dealerships, transport services, logistics, and component MSMEs. Informal sector jobs (drivers, mechanics, small service garages) will also benefit.

Vehicle purchases are credit-driven (NBFCs, banks, fintech lenders). A revival in auto sales will support retail loan growth, improve asset quality, and expand financial inclusion in semi-urban India. Policy certainty through rational GST rates encourages fresh investments in the automobile sector. It will also promote Make In India and the manufacturing sector. GST rate cuts will encourage the replacement of old vehicles with new, fuel-efficient models, thereby supporting cleaner mobility.

Specific Changes in GST Rates

- Two-Wheelers (Bikes up to 350cc): The GST rate has been reduced from 28% to 18%. This will reduce the price of bikes, making them more accessible to youth, professionals, and lower-middle-class households. Bikes are the primary mode of transport in rural and semi-urban India; cheaper bikes will directly benefit farmers, small traders, and daily wage earners.
- Small Cars (GST down to 18% from 28%): Cars in the affordable segment will become cheaper, encouraging first-time buyers and expanding household mobility. Reduced GST will stimulate sales in smaller cities and towns where small cars dominate.
- Large Cars (GST reduced to flat 40% with no cess): Removal of the additional cess has not only reduced the rates but also makes taxation simple and predictable. Even at 40%, the absence of cess will lower the effective tax on larger cars, making them relatively more affordable for aspirational buyers.
- Tractors (1800 cc down from 12% to 5%): Road tractors for semi-trailers (engine capacity more than 1800 cc down from 28% to 18%) and tractor parts reduced to 5%. India is one of the world’s largest tractor markets; GST cuts will push demand in both domestic and export segments.
- Buses (seating capacity of 10+ persons): Lower tax rate will reduce the upfront cost of buses and minibuses (10+ seater). This will spur demand from fleet operators, corporates, schools, tour operators, and state transport undertakings. Affordable ticket fares for passengers (especially in semi-urban/rural routes). Encourages shift from private vehicles to shared/public transport, reducing congestion and pollution.
- Commercial Goods Vehicles (Trucks, delivery-vans, etc.): GST down from 28% to 18%. Reducing GST reduces upfront capital cost of trucks, which lowers freight rates per tonne-km. This has a cascading effect. It will lead to cheaper movement of agri goods, cement, steel, FMCG, and e-commerce deliveries. It will reduce inflationary pressures. Supports MSME truck owners, who form a large share of India’s road transport sector.

Godrej Consumer Products Expansion

Separately, Godrej Consumer Products Ltd (GCPL) has announced a Rs 250 crore investment in a new manufacturing facility in Indonesia. This expansion is aimed at meeting growing consumer demand and consolidating the company’s manufacturing footprint in Southeast Asia. The new facility will enhance the company's production capacity in the Home Care and Personal Care segments by approximately 15% over 18-36 months [2]. This strategic move reflects GCPL’s long-term confidence in the growth potential of its Indonesia business.

Conclusion

The new GST rates and slabs are expected to have a wide-scale impact on heavy industries and the automobile sector. The rate cuts will boost demand, support job creation, and encourage investments. Godrej Consumer Products' expansion in Indonesia also signals confidence in the region's growth potential. These developments are likely to have a positive impact on the Indian economy and the manufacturing sector.

References

[1] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2164587
[2] https://economictimes.indiatimes.com/markets/stocks/news/godrej-consumer-products-shares-in-focus-on-rs-250-crore-investment-in-indonesia-manufacturing-facility/articleshow/123776825.cms