If you’re planning to buy a small car or bike, this news will surely make you happy. The central government has announced a great gift for the festive season.
In the GST Council meeting held on September 3, chaired by Finance Minister Nirmala Sitharaman, the GST rate on small cars and motorcycles up to 350cc has been cut from 28% to 18%. Also, electric vehicles will now be taxed at just 5% GST.
These new rates will take effect from September 22, 2025. Let’s look at the new GST rates on vehicles and compare them with the earlier ones.
Biggest Benefit for Cars up to 1200cc
Small cars will get the most advantage. Earlier, petrol and CNG cars up to 1200cc and less than 4 meters long were charged 28% GST plus 1% cess, totaling 29%.
Now this tax has been reduced to just 18%. Popular car makers like Maruti Suzuki, Tata Motors, Hyundai, Mahindra, Kia, Toyota, Renault, Nissan, and Citroen sell many cars in this category, and this cut will likely boost their sales.
Discount on Diesel Cars up to 1500cc
Diesel and diesel hybrid cars up to 1500cc and under 4 meters will also benefit. Their GST rate has been reduced from 28% to 18%. Earlier, including cess, these cars attracted a total tax of 31%.
GST Cut on Bikes up to 350cc
Bikes with engines up to 350cc will now attract 18% GST instead of 28%, a 10% reduction. This will benefit buyers of popular two-wheeler brands like Hero MotoCorp, Honda, TVS, and Bajaj.
New Rates for 3-Wheelers and Commercial Vehicles
GST on 3-wheelers has also been cut from 28% to 18%. Other transport vehicles like buses, trucks, and ambulances have received tax relief as well. Additionally, auto parts will now be taxed at 18%.
Tax Rates on Bigger Cars and Bikes
Luxury and mid-size cars will face a 40% GST. Petrol cars over 1200cc and diesel cars above 1500cc are included.
SUVs, MUVs, MPVs, and XUVs with ground clearance above 170mm will also be taxed at 40%. Bikes with engine capacity above 350cc, along with helicopters, airplanes, yachts, and recreational vehicles, will come under this 40% tax bracket.
Lower GST Than Before on Big Vehicles
Previously, big and luxury cars faced 28% GST plus 22% cess, totaling 50% tax. Now, this tax is reduced to 40% with no cess applicable, making these vehicles comparatively cheaper.
