GST Cuts Make Small Cars and Bikes More Affordable
The Goods and Services Tax (GST) Council has announced a major change to tax rates on vehicles, making smaller, more affordable options cheaper just in time for the festive season. The new rates will go into effect on September 22, 2025.
Lower Taxes on Small Cars and Bikes
The GST rate for small cars and bikes with engines under 350cc has been cut from 28% to 18%. This change is expected to significantly reduce their prices, boosting sales.
What is a small car? Under the new rules, a small car is defined as:
- A petrol car with an engine up to 1200cc.
- A diesel car with an engine up to 1500cc.
- A car with a length of 4,000mm or less.
Any car that doesn’t meet these criteria will now be taxed at 40%, up from the previous 28% (plus a cess of up to 22%).
Motorcycles: Cheaper for Some, Costlier for Others
While bikes under 350cc, like the Royal Enfield 350cc, will now be cheaper, larger bikes with engines over 350cc will become more expensive. These motorcycles will now be taxed at 40%, a significant jump from the previous rate of 28% (plus a 3-5% cess). This means popular models like the Royal Enfield 450 and 650cc will see a price increase.
Other Key Changes
The new tax structure also brings benefits to other segments of the auto industry:
- Commercial vehicles, including buses, trucks, three-wheelers, and ambulances, will now be taxed at 18%, down from 28%.
- Auto components now fall under a single, simplified 18% GST slab. Previously, parts were taxed at various rates (12%, 18%, or 28%).
- Electric vehicles (EVs) will continue to be taxed at a low 5% to promote green mobility.
