Small cars, bikes up to 350 cc to get cheaper as GST reforms kick in

Small automobiles and entry-level bikes are set to get cheaper because the GST Council on Wednesday (September 3, 2025) permitted a whole overhaul of the tangled Items and Providers Tax (GST) regime.

The GST Council permitted limiting slabs to five% and 18% efficient from September 22, the primary day of Navaratri.

Petrol, LPG and CNG automobiles of lower than 1,200 cc and less than 4,000 mm size and diesel automobiles of as much as 1,500 cc and 4,000 mm size would transfer to the 18% fee from the present 28%.

Bikes as much as 350 cc could be taxed at a decrease GST of 18% in opposition to 28% at present.

All cars above 1,200 cc and longer than 4,000 mm in addition to bikes above 350 cc and racing automobiles will probably be charged with a 40% levy.

Small hybrid automobiles can even profit, whereas EVs will proceed to be charged at 5%.

“Authorities listened to the automotive trade’s long-standing want record of rationalising GST charges,” Mercedes-Benz India MD and CEO Santosh Iyer stated in an announcement.

This GST revision is the step in proper course, is progressive and can induce the much-needed impetus by boosting consumption and convey momentum to the automotive trade which primarily stays the heart beat of the Indian economic system, he added.

“We’re grateful to the Authorities for holding the GST fee for BEVs unchanged, guaranteeing sooner transition to a decarbonised future, whereas decreasing oil imports,” Mr. Iyer stated.

Presently, cars are taxed at 28%, which is the very best GST slab.

A compensation cess, starting from 1% to 22%, is levied on high of this fee, relying on the kind of car.

The overall tax incidence on automobiles, relying on engine, capability and size, ranges from 29% for small petrol automobiles to 50% for SUVs.

Moreover, GST on auto elements has been decreased to 18% from the present 28%.

“ACMA welcomes the federal government’s choice to carry all auto elements below a uniform 18% GST slab — a long-standing suggestion of the trade,” Automotive Element Producers Affiliation of India (ACMA) DG Vinnie Mehta stated.

This landmark reform will assist curb the gray market, ease compliance, assist MSMEs, and improve the worldwide competitiveness and resilience of India’s automotive part trade, he added.

“The transfer makes tractors and farm equipment extra inexpensive for farmers, reduces prices for business automobiles and improves accessibility for private mobility by way of rationalisation of charges throughout all SUVs. Collectively, these measures are anticipated to stimulate demand and drive inclusive progress throughout your complete ecosystem,” Rajesh Jejurikar, ED & CEO, Auto and Farm Sector, M&M, stated.

The continuation of the 5% GST fee on EVs is a vital enabler of India’s clear mobility imaginative and prescient. This measure will additional speed up the adoption of electrical automobiles and reinforce India’s management in sustainable, inexperienced transportation, Mr. Jejurikar stated.

The GST panel permitted simplifying the GST from the present 4 slabs of 5%, 12%, 18% and 28%, to a two-rate construction of 5% and 18%.

A particular 40% slab can also be proposed for a choose few gadgets.