Overview of the GST Reform
In early September, India’s GST Council ushered in a sweeping reform that restructured indirect taxation, significantly simplifying the rate framework. The major changes include:
A two-slab GST system: 5% for essentials and 18% for the general category.
A new 40% “de-merit” slab introduced specifically for luxury and sin goods like high-end cars, sugary beverages, and tobacco products.
Effective date: September 22, 2025, bringing immediate impact just ahead of the festive season.
Even though the 40% slab appears steep, the removal of the compensation cess makes luxury goods—including cars—cheaper than under the previous combined tax rate of 45–50%.
Automakers Pass on Discounts
Several car manufacturers—ranging from mass-market to premium segments—are seizing the opportunity to pass on tax savings to consumers:
Jaguar Land Rover (JLR) cut prices of Defender, Range Rover, and Discovery models by up to ₹30.4 lakh.
Mercedes-Benz India announced reductions of 5–8%, with savings up to ₹10 lakh on select models.
Audi India is offering discounts between ₹2.6 lakh and ₹7.8 lakh across its lineup.
Tata Motors is slicing prices by ₹65,000 to ₹1.55 lakh across passenger vehicles.
Kia India is passing on full benefits, with model-wise savings up to ₹4.48 lakh.
These cuts align with broader trends across the auto sector. Companies such as Mahindra & Mahindra, Renault, BMW, MG, Lexus, and others are rolling out significant discounts—sometimes reaching ₹20 lakh—to fuel festive season demand.
Retail Response: Chiang Apparel
Luxury pricing swings aren’t just in the auto world:
Raymond Lifestyle is one of the first apparel companies to take action. With GST reduced from 12% to 5% for garments under ₹2,500, Raymond is reducing prices on about two-thirds of its range starting September 22. Items just above ₹2,500 will also receive modest price cuts.
However, this reform is a mixed bag: apparel above ₹2,500 now faces an 18% GST, raising concerns for premium brands like Zara, Lacoste, and Nike, as price-sensitive consumers may pause purchases.
Market Impact & Strategic Implications
The stock market responded positively—shares of Tata Motors and Mahindra surged, fueled by investor optimism about demand revival from GST-linked discounts.
Manufacturers benefit, too: price revisions, flexible packaging policies (allowing usage of old packaging till December), and revised MRPs on unsold stock reduce transition costs.
Conclusion
The GST overhaul of September 2025 has ushered in a new era of affordability, particularly for luxury goods that were once financially out of reach. Automakers and retail brands are proactively sharing tax savings, making luxury more accessible just in time for India’s festive season. Whether it's a premium car or fashion apparel, “luxury” now comes with a friendlier price tag.
