Quick Take
- GST on small cars, bikes up to 350cc, and three-wheelers reduced from 28% to 18%.
- Larger cars, SUVs, and premium bikes shifted to a simpler flat 40% slab.
- Commercial vehicles and spare parts brought under a unified 18% GST.
- EVs remain the most affordable with a concessional 5% GST rate.
Introduction
Just ahead of the festive season, the government has given Indian vehicle buyers a reason to celebrate. The GST Council has overhauled automobile taxation, cutting rates for small cars, commuter bikes, and three-wheelers from 28% to 18%. Starting September 22, 2025, this move will make entry-level vehicles significantly more affordable for families, students, and small businesses.
At the same time, bigger cars and premium motorcycles have been moved into a 40% slab, replacing the older, more complicated system of GST plus cess. Commercial vehicles and auto parts too get much-needed clarity with a unified 18% rate. And in line with India’s clean mobility push, EVs remain the cheapest to tax at just 5%.
Everyday Vehicles Get Cheaper
For most buyers, the biggest win is the new 18% GST rate. This covers the bulk of India’s mass-market vehicles, which will now be far easier on the pocket.
- Small cars – Petrol cars up to 1200cc, diesel up to 1500cc, and length under 4 metres. Think Maruti Dzire, Kia Syros, and other popular hatchbacks.
- Motorcycles up to 350cc – The heart of India’s two-wheeler market, including icons like the Royal Enfield Bullet and Classic 350.
- Three-wheelers – Auto-rickshaws and passenger carriers, which millions rely on daily.
- Compact hybrids – Petrol/CNG/LPG hybrids under 1200cc (petrol) or 1500cc (diesel), such as the Nexon CNG.
With this cut, a ₹6 lakh car could be ₹60,000 cheaper, which is a big difference for budget buyers.
Premium Cars & Big Bikes in a 40% Slab
For those shopping in the premium lane, the council has introduced a new flat 40% GST. While still higher than entry-level vehicles, this is simpler and lower than the earlier 50% (GST + cess).
- SUVs and midsize cars like the Hyundai Creta, Kia Seltos, and Mahindra XUV700.
- Big bikes over 350cc — from the KTM Duke 390 to the Triumph Speed 400.
- Larger hybrids such as the Toyota Innova Hycross and Maruti Grand Vitara.
- Luxury lifestyle vehicles — yachts, RVs, and even small private aircraft.
For premium buyers, it’s not exactly cheap — but it’s cleaner, clearer, and a little lighter on the wallet.
Commercial Vehicles & Auto Parts Get Simplified
The new rules don’t just help individual buyers. Businesses and suppliers will also benefit from tax clarity.
- Buses, trucks, and ambulances are now under a uniform 18% slab (earlier 28%).
- Auto parts are streamlined at 18% across categories, ending the old confusion caused by different HS codes.
This simplification reduces costs for fleet operators and makes supply chains smoother.
EVs Stay the Tax Champions
Electric vehicles remain the government’s favorite. Nothing changes here: all EVs — from scooters to passenger cars to three-wheelers — continue at just 5% GST.
This ensures EVs stay the most affordable option tax-wise, supporting India’s transition to cleaner mobility. The only missing piece is clarity on luxury EVs, which might see changes in the future.
Conclusion
The GST reform is a win for both buyers and the industry. Families and commuters benefit most, with small cars, bikes, and three-wheelers now under 18% GST, making them truly affordable. Premium buyers see some relief too, thanks to the simplified 40% slab. Businesses get predictability with commercial vehicles and parts at 18%, while EVs continue to enjoy their 5% edge.
Rolling out just before the festive season, these changes are set to spark demand across the board — from compact hatchbacks to luxury SUVs. For buyers, it means more choices at better prices. For the industry, it’s a timely push to recover lost momentum.
Simply put: whether you’re a student eyeing your first bike, a family looking at a budget hatchback, or a business investing in fleets, September 22 marks the beginning of a lighter, more festive ride.