In a major relief for budget-conscious buyers and just in time for the festive season, the GST Council has announced a sweeping revision of tax rates for the automobile sector. Effective September 22, 2025, small cars, commuter motorcycles (up to 350cc), and three-wheelers will now attract 18% GST, down from the earlier 28%.
This restructuring of slabs is aimed at boosting demand in the mass-market segments, while simultaneously bringing larger vehicles and luxury models under a new, simplified 40% GST slab, replacing the earlier 50% effective tax (which included a 28% GST + 22% cess).
What Gets Cheaper?
The 18% GST slab will now apply to:
– Petrol cars up to 1200cc and diesel cars up to 1500cc, not exceeding 4,000 mm in length.
– Motorcycles up to 350cc (Royal Enfield 350cc range will see price cut as they are powered by 349cc engine)
– Three-wheelers, including passenger autorickshaws and goods carriers.
What Moves to 40% GST?
Although these vehicles move into a high GST bracket, they will still become cheaper overall, as the earlier cess has been eliminated. The new 40% slab will cover:
– Cars and SUVs exceeding 1200cc (petrol) or 1500cc (diesel) and longer than 4,000 mm.
– Motorcycles above 350cc.
– Aircraft, yachts, and other recreational vehicles meant for personal luxury.
Commercial Vehicles and Auto Parts Simplified
In a move welcomed by the logistics and transport industry, GST on buses, trucks, and ambulances has been streamlined to a flat 18%, down from 28%. Auto components, often split across different tax brackets, are now unified under 18%, easing compliance for manufacturers and suppliers.
EVs Stay at 5%
The Council has retained the concessional 5% GST rate for electric vehicles, reinforcing the government’s push towards clean mobility. Whether two-wheelers, three-wheelers, or passenger EVs, this slab ensures EVs remain the most tax-advantaged choice.
A Timely Festive Boost
The GST cut is expected to deliver a strong boost to auto sales ahead of the festive season. For entry-level buyers, the savings could be substantial, while larger SUVs and premium vehicles also stand to benefit from the simplified tax structure. For the industry, which has been navigating slowdowns and inventory build-up, this move is expected to lift sentiment and accelerate demand in the coming months.
Bottom line: With the new GST regime kicking in from September 22, 2025, buyers of small cars, bikes, and three-wheelers are set to save big – making this festive season one of the best times in recent years to make a purchase.
