Exciting news for auto enthusiasts! The Indian government has just made a fabulous move by slashing tax rates on certain categories of cars and motorcycles. Get ready for some great savings! Petrol, diesel, and hybrid cars that were previously taxed at 28% will now only attract an 18% GST, as long as they fit into the small car definition. That means vehicles less than 4 meters long with petrol engines under 1,200cc or diesel engines beneath 1,500cc can enjoy this fantastic benefit!
But that’s not all—motorcycles with engine capacities below 350cc will also see a delightful drop from 28% to 18%! This tax reduction for small cars and smaller-capacity motorcycles is sure to rev up the automobile sector, giving it the much-needed boost to accelerate growth.
And there’s more good news for large car lovers! Previously, these vehicles faced a hefty tax structure of 28% GST plus cess, pushing the effective tax rate to a whopping 48-50%. Now, they’ll only have to deal with a GST rate of 40%, no matter the powertrain!
However, there’s a bit of a downer for large capacity motorcycles, which are those with engines over 350cc. These bikes will see a tax increase from 31% (28% GST + 3% cess) to a new slab of 40%. Ouch! This puts them alongside sin goods.
On a brighter note, there was talk of increasing taxes on electric vehicles, but the rates have remained steady at just 5%. This decision aligns perfectly with the government’s mission to promote electric mobility and will surely make luxury EV manufacturers happy, especially since the luxury segment is witnessing impressive EV adoption rates of around 8% compared to just 2% across the entire industry.
Mark your calendars! The new tax slabs will be effective from September 22, coinciding with the festive season of Navratri. What a fantastic time to embrace change in the automotive world!
Rajesh Jejurikar
ED & CEO – Auto and Farm Sectors, Mahindra & Mahindra Ltd.
“We applaud the Government for this landmark GST rationalisation, which will have a far-reaching positive impact across the automotive and farming sectors . The move makes tractors and farm machinery more affordable for farmers, reduces costs for commercial vehicles and improves accessibility for personal mobility through rationalisation of rates across all SUVs. Together, these measures are expected to stimulate demand, and drive inclusive growth across the entire ecosystem.
We also appreciate the continuation of the 5% GST rate on EVs, which is a critical enabler of India’s clean mobility vision. This measure will further accelerate the adoption of electric vehicles and reinforce India’s leadership in sustainable, green transportation.”
Dr. Anish Shah
Group CEO & MD, Mahindra Group
“The next-generation GST reforms announced today mark a defining moment in India’s journey towards building a simpler, fairer, and more inclusive tax system. By moving to a streamlined two-rate structure and focusing on essentials that touch the lives of every citizen- from food, health, and insurance to agriculture and small businesses -the Government has reaffirmed its commitment to Ease of Living and Ease of Doing Business. The rationalisation measures will not only provide immediate relief to households but also strengthen key sectors such as automobiles, agriculture, healthcare, renewable energy, and MSMEs – all of which are vital to job creation and sustainable growth. The correction of long-pending inverted duty structures in critical industries is welcome.
At Mahindra, we view these reforms as transformative. They simplify compliance, expand affordability, and energise consumption, while enabling industry to invest with greater confidence. This bold step is in line with the vision articulated by the Hon’ble Prime Minister of building a citizen-centric, future-ready Bharat. It strengthens India’s economic foundations and will help drive the next phase of equitable and inclusive growth- journey towards Viksit Bharat @2047.”
GST Reforms from Mr. Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles & Tata Passenger Electric Mobility:
“These reforms reflect Prime Minister Narendra Modi’s vision for next-generation GST that prioritizes both ease of living and ease of doing business. The streamlined GST framework goes beyond rate rationalization with structural reforms enhancing long-term confidence in India’s economic environment.
The GST Council’s decision to retain the 5% GST rate on electric vehicles is a forward-looking move that reinforces India’s commitment to sustainable, zero-emission mobility and signals long term policy stability. The reduction of GST on small cars to 18% further expands access to personal mobility, making it more affordable for a broader section of society. Together, these measures will not only accelerate EV adoption but also drive innovation, strengthen domestic manufacturing, and propel India toward a cleaner, smarter, and self-reliant mobility future.”
Mr. Girish Wagh, Executive Director, Tata Motors on the GST Reforms announcement.
“Guided by the visionary leadership of the Hon’ble Prime Minister and the Hon’ble Finance Minister, the GST Council’s progressive decision to reduce the GST rate on Commercial Vehicles — trucks, buses, and ambulances — to 18% marks a pivotal reform in India’s mobility landscape. This landmark reform will significantly accelerate fleet modernization, driving the adoption of safer, smarter, and greener vehicles across India. By resolving the long-standing issue of inverted duty for transporters, it unlocks greater affordability and liquidity, strengthening the entire commercial mobility ecosystem. Further, the reduction in GST on hydrogen fuel cells to 5% is a forward-looking move that reinforces India’s commitment to clean energy and zero-emission mobility. This timely intervention is a catalyst for sustainable growth in logistics and public transport, a boost to economic momentum, and a powerful enabler in India’s journey of inclusive growth and nation building.”
