GST 2.0, customs reforms to accelerate next wave of Indo-Japan collaboration in auto sector: Report

New Delhi, Nov 17 (PTI) Significant regulatory transformations such as GST 2.0 and progressive customs reforms are likely to accelerate investment flows, promote EV adoption, and drive the next wave of Indo-Japan collaboration in clean mobility and advanced manufacturing, according to a report.

With USD 43.3 billion in cumulative investments, Japan is India's fifth-largest foreign investor. A deeper utilisation of the Indo-Japan FTA will be key to driving competitiveness, enabling technology transfer, and advancing India's journey toward a sustainable, innovation-led automotive future, Grant Thornton Bharat and the Indo-Japan Chamber of Commerce and Industry (IJCCI) said in a joint whitepaper.

"The convergence of GST 2.0 and targeted customs incentives marks a defining moment for India's automotive sector. Reduced tax rates, simplified compliance, and supply-chain-focused exemptions will not only elevate India's cost competitiveness but also strengthen its positioning as a manufacturing and export hub for Japanese automakers," Grant Thornton Bharat Partner, India Investment Advisory, Sohrab Bararia said.

As per the whitepaper -- Navigating change: GST 2.0, customs, and FTA impacts on the India-Japan auto sector, Japanese companies in the automotive sector have built strong manufacturing bases in states like Haryana, Gujarat, Tamil Nadu, and Maharashtra.

These hubs cater to both domestic demand and exports to Africa and Southeast Asia. Recent joint ventures increasingly focus on electric vehicles, sustainable mobility, and advanced manufacturing technologies.

The number of Japanese companies in India's auto and auto components space rose from 173 in 2022 to 186 in 2025, reflecting growing interest in India's scale and cost advantages, it added. Japanese firms have established a strong presence in key automotive clusters such as Haryana, Gujarat, and Tamil Nadu, using India as a base to export to emerging markets, including Africa.

Following the GST rate changes, the auto industry recorded a sharp surge in customer interest and vehicle deliveries, with booking volumes rising by nearly 50 per cent in the small car segment, Grant Thornton Bharat said.

Complementing GST reforms, the Union Budget 2025 announced measures to boost the EV sector by balancing supply and demand incentives. Customs duty exemptions on lithium-ion battery scrap and critical minerals such as lead and copper aim to secure raw materials and generate employment, it added.

This regulatory reset is expected to accelerate investment flows, promote EV adoption, and drive the next wave of Indo-Japan collaboration in clean mobility and advanced manufacturing, Grant Thornton Bharat Partner, Auto & EV Industry Leader, Saket Mehra said.

"As we navigate the intersection of regulatory transformation and global collaboration, we are poised to unlock even greater opportunities within the Indian automotive sector," Indo-Japan Chamber of Commerce and Industry Secretary General, Suguna Ramamoorthy said.

There is significant partnership between India and Japan in the automotive sector, particularly in the realms of hybrid and electric vehicles, and high-precision components. The Free Trade Agreement (FTA) serves as a crucial catalyst for collaboration, joint research and development, she noted.

Car exports from India to Japan reached USD 616.45 million in the first nine months of FY2025, with auto component exports amounting to USD 171.72 million in 2024, Ramamoorthy said. PTI RKL DR DR