New GST Rate Cut To 18%: Hatchbacks, Subcompact SUVs, Mass-Market Scooters And Bikes To Get Cheaper

Just in time for the festive season, automobile buyers have received major relief when it comes to the prices of new vehicles. Following Prime Minister Narendra Modi's announcement of the rationalisation of GST rates on Independence Day, the Finance Ministry has introduced new and simplified tax slabs for various goods, including passenger and commercial vehicles, as well as spare parts. The new tax regime slabs go into effect from September 22, 2025, and are likely to bring their costs down.

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Bigger cars will now attract a flat 40% tax with zero cess.

New GST Rates For Four-Wheelers

After the recent GST council meeting, it has been announced that cars which are under 4 meters in length and run on 1200cc Petrol engines or 1500 cc Diesel engines or lesser will now attract a GST rate of 18% instead of the earlier 28%. This means cars in all mass market segments like hatchbacks, subcompact sedans, and subcompact SUVs will now become cheaper than earlier.

All other cars and SUVs that are above the above-mentioned engine and size capacity will attract a flat 40% GST. However, unlike before, there will be no cess applicable on their purchase, which effectively means they too will see a drop of 6-10% in GST rates depending on the vehicle. EVs will continue to attract a rate of 5% irrespective of the segment they belong to.

Used car GST rates too have been revised, and as per the new tax regime slabs, it will be a uniform 18% for all pre-owned vehicles.

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Bikes above 350cc will attract higher taxes than before.

New GST Rates For Two-Wheelers:

There is some important GST news for two-wheelers as well. Scooters and motorcycles, which run on 350 cc engines or lesser, will also now attract an 18% GST instead of the earlier 28%. However, motorcycles and scooters that run on engines bigger than 350 cc will now be taxed at 40%, making them more expensive than earlier.

New GST Rates For CVs and Spare Parts:

The Government has also reduced tax slabs on trucks, buses, and ambulances from an earlier 28% to 18% while three-wheelers will also now be taxed at 18% down from 28%. Spare parts will be sold with 18% GST too, starting September 22.