The new GST slab for automobiles in India, effective from September 22, 2025, includes a far simpler slab which comes as a great relief for the general public, especially the buyers of small cars and 2-wheeler automobiles. The new GST slabs now tax small cars, entry-level motorcycles, and commercial automobiles at an 18% GST rate, while larger luxury/premium vehicles and larger motorcycles will now attract a 40% flat GST rate without cess.
Key Changes in GST Slabs
- Small Cars (small cars are classified as under 4 meters in length, have a petrol engine of up to 1,200 cc and diesel engine of up to 1,500 cc) and Entry-level Motorcycles (motorcycles with engine capacity of no more than 350 cc) will reduce from 28% GST + 1–3% cess to a flat 18% GST rate, which has removed all compensation cess.
- Larger/Premium Cars (and motorcycles that are larger than 1,200cc petrol or 1,500 cc diesel, or motorcycle engine capacity, larger than 350 cc; length is larger than 4 meters) will shift to a flat GST of 40%, down from its previous overall tax of 28% GST plus 17-22% cess which varies between state jurisdictions and could be calculated to upwards of 50%.
- Auto components will transition to 18% GST, which means it will contribute to the maintenance rate.
Automobile GST Slab Changes: Old vs New with Public Benefits
| Category | Old GST + Cess (%) | New GST (%) | Approx. Savings for Buyers | Benefit to Public |
| Small Cars (Petrol <1.2L, Diesel <1.5L, <4m) | 29–31% | 18% | 11–13% cheaper | More affordable small cars for families |
| Two-Wheelers (<350cc) | 28% | 18% | 10% cheaper | Lower bike prices, easier daily mobility |
| Large / Luxury Cars, SUVs | 43–50% | 40% | Up to 10% cheaper | Simplified pricing, though high-end still taxed |
| Auto Components | 28% | 18% | 10% cheaper | Reduced vehicle maintenance costs |
| Commercial Vehicles | 28% | 18% | 10% cheaper | Lower transport and logistics costs |
Public Benefits
- Significant cost reduction: For cars and motorbikes, a Rs 50,000 to 70,000 price drop can be realized in popular models such as the Maruti Swift, Hyundai i20, Tata Tiago, and Hero Splendor.
- No compensation cess: The elimination of the cess means a lower and clearer price structure, which is helpful for buyers when they plan.
- Lower registration costs: Road tax calculated on reduced ex-showroom prices further enhances affordability.
- Easy accessibility to personal mobility: Higher initial costs directly help first-time buyers and family-income groups. More people owning cars and bikes will create demand, thereby propelling the sector.
- Cheaper repairs: As a result of lower rates on auto components under GST, post-purchase activities are inexpensive for vehicle owners.
- Joyful offerings: The rates fall during Navaratri and Diwali, thereby giving buyers considerable price relief to celebrate.
Enjoyable Opportunities for Public
- Expanded options for budget car and bike buyers, as formerly cost-prohibitive models become affordable.
- Greater competition in the market to ensure benefits are passed on to consumers and model availability is increased.
- Less cost of ownership means safer and surer, newer vehicles on highways.
The new GST reform makes personal transport more affordable, helps people save money, and simplifies automobile taxes in India.
Also Read: New GST Slab Structure: Impact from September 22, 2025
