New Delhi, Aug. 29 -- The Indian automobile industry is expected to receive a major demand push as optimism builds over a potential Goods and Services Tax (GST) rate reduction, according to a recent report by Jefferies.

The proposed tax rationalization, likely to be announced early next month is likely to benefit two-wheelers (2Ws) and small passenger vehicles (PVs) the most.

According to the report, the GST rate cut, anticipated to reduce tax slabs from 28 per cent to 18 per cent for most vehicles and from 12 per cent to 5 per cent for tractors, could lower on-road prices by 6-8 per cent. "This would significantly improve affordability and support demand recovery," Jefferies said.

The funding mechanism for this cut includes converting...