GST Rate Cuts on Cars, Bikes & EVs – 56th GST Council Meeting 2025

 

GST Rate Cuts on Cars, Bikes & EVs – 56th GST Council Meeting Highlights

The 56th GST Council Meeting, held on 3rd September 2025 in New Delhi, brought historic relief to the automobile industry. From small cars to electric vehicles, motorcycles, tyres, and even cement, several GST reductions were announced, making vehicles more affordable and boosting demand in India’s auto sector.

The changes will come into effect from 22nd September 2025, except for tobacco-linked products. Let’s break down the key GST changes for automobiles and auto components.

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🚗 GST Rate Cuts on Cars

1. Small Cars

   • Petrol cars up to 1200cc engine capacity & 4000mm length
   • Diesel cars up to 1500cc engine capacity & 4000mm length
   • Old GST Rate: 28%
   • New GST Rate: 18%
     ✅ This is expected to reduce the on-road price of hatchbacks and compact sedans by 7–10%.

2. Luxury Cars & SUVs

   • Larger petrol & diesel cars (engine above limits or length >4000mm)
   • Old GST Rate: 28%
   • New GST Rate: 40%
     ❌ This keeps luxury cars in the high-tax bracket to balance revenue.

3. Hybrid Cars

   • Smaller hybrids (under 1200cc petrol / 1500cc diesel, <4000mm)
   • Old GST Rate: 28%
   • New GST Rate: 18%
   • Bigger hybrid cars remain taxed at 40%.

4. Electric Vehicles (EVs) & Fuel Cell Vehicles

   • Old GST Rate: 12%
   • New GST Rate: 5%
     ✅ Major push for India’s EV adoption drive.

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🏍️ GST Rate Cuts on Motorcycles

1. Bikes & Scooters (≤350cc)

   • Old GST Rate: 28%
   • New GST Rate: 18%
     ✅ Affordable commuter bikes and scooters will see price drops.

2. Luxury Motorcycles (>350cc)

   • Old GST Rate: 28%
   • New GST Rate: 40%
     ❌ Premium bikes (like Harley-Davidson, Triumph) will cost more.

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🔋 GST on Auto Parts & Components

• Tractor parts (gearbox, brakes, steering, hydraulic systems): 18% → 5%
• Tyres & tubes: 18% → 5%
• Auto parts for cars & bikes: 28% → 18%
  ✅ This will reduce maintenance costs for vehicles and support MSMEs in the auto components sector.

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🏗️ Cement & Auto Infra

• Cement, a key material for highways, bridges & auto infra:
  • Old GST Rate: 28%
  • New GST Rate: 18%
    ✅ This will cut construction costs, benefiting highway expansion and logistics for the auto industry.

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📉 Impact on the Automobile Sector

1. Car Buyers: Entry-level car prices will reduce, encouraging first-time buyers.
2. Bike Buyers: Budget bikes and scooters become cheaper, supporting rural demand.
3. EV Market: Drastic GST cut (12% → 5%) will make EVs far more affordable.
4. Luxury Vehicles: High GST (40%) ensures premium vehicles remain taxed heavily.
5. Auto Industry Growth: Component manufacturers and MSMEs get relief from reduced GST on parts and tyres.

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FAQs on Automobile GST Rate Changes

Q1. From when will the new GST rates on cars and bikes apply?
All GST changes in automobiles are effective from 22nd September 2025.

Q2. What is the GST on small cars now?
Small petrol and diesel cars will attract 18% GST instead of 28%.

Q3. What is the GST rate for electric vehicles?
EVs and fuel cell vehicles will now be taxed at just 5% GST.

Q4. Will luxury cars and superbikes get cheaper?
No. Luxury cars and bikes over 350cc are now taxed at 40% GST, making them costlier.

Q5. How does the GST cut benefit the auto industry?
Lower GST will increase demand, support manufacturers, reduce vehicle ownership costs, and boost EV adoption.

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