GST Council Meeting: New GST Rates - Small Cars, Luxury Cars, Bikes Under 350cc And Three-Wheelers Get Cheaper With New 18% GST Slab

Your next car or bike just got cheaper! The GST Council has cut taxes on small cars, bikes up to 350cc, and three-wheelers to 18%, down from 28%. Kicking in from September 22, 2025, this festive-season gift will make entry-level rides more affordable, even as luxury cars and big bikes move into a steep new 40% slab, but will still attract a lesser tax. How? Read this story till the end to know more!

Small Cars, Bikes & Three-Wheelers Get A Tax Break

In a historic GST overhaul, the government has revised the GST rates for automobiles. This will bring entry-level hatchbacks, commuter bikes, and autorickshaws within the reach of consumers, in time for the festival season.

Under the new definition, small cars are petrol cars with a capacity of up to 1200cc or diesel cars up to 1500cc with a maximum length of 4000mm. These fall solidly into the 18% GST category.

To sum up, these are the vehicles that fall under the 18% GST slab:

• Small cars, i.e. petrol engines up to 1200cc, diesel up to 1500cc, and length under 4000mm, like Maruti Dzire, Kia Syros, etc.

• Motorcycles up to 350cc, like the Royal Enfield Bullet and the Royal Enfield Classic 350.

• Three-wheelers

• Hybrid cars, i.e. Petrol/LPG/CNG up to 1200cc or diesel up to 1500cc, under 4000m,m like Brezza S-CNG, Nexon CNG, and more.

Hybrid diesels and petrol hybrids (like Maruti Grand Vitara, Toyota Innova Hycross, and also the newly unveiled or upcoming Maruti Victoris), above these limits, however, move to the higher 40% bracket.

What Moves To The 40% Slab?

A new 40% slab for luxury and sin items has been introduced by the council. 

This consists of:

• Motorcycles with engine sizes above 350cc, like KTM Duke 390, Triumph Speed 400 and more

• Large and mid-size cars, i.e. the ones exceeding 1200cc in petrol and 1500cc in diesel, with a length exceeding 4000mm, like Hyundai Creta, Kia Seltos and more

• Hybrids, i.e. Petro/LPG/CNG above 4000mm and 1200cc of displacement like the Maruti Grand Vitara, Honda City e:HEV, and also the new upcoming Maruti Victoris CNG 

• Aircraft, yachts, and other recreational vehicles for pleasure purposes

It’s not just mass market cars that are cheaper. Cars above 4 metres in length, and/or with engine capacity exceeding 1500cc will become more affordable too. Cars such as the Hyundai Creta, Kia Seltos, Tata Harrier, Mahindra XUV700, Mahindra Scorpio N are set to benefit from this. 

Earlier, these vehicles would have an effective tax of 50% including a 22% compensation cess. The GST reforms have eliminated the cess component entirely, and these cars will now be taxed at a flat 40% rate.

Consistency Across Commercial Vehicles & Parts

GST Council has also made taxes more simplified across commercial businesses:

• Buses, trucks, and ambulances are now uniformly charged at 18% (previously 28%).

• Auto parts are now bracketed in a single 18% rate, regardless of HS code classification.

This step is likely to reduce manufacturers' and parts suppliers' confusion, simplifying the supply chain.

Electric Vehicles Remain At 5%

Interestingly, nothing changes in the EV space. All electric vehicles, two-wheelers, and three-wheelers continue to benefit from the concessional 5% GST, maintaining them as the most tax-favoured mobility choice. 

While the bracket still remains at 5%, there’s no clarity about luxury EVs, nor a price cap defined. 

Why Does It Matter For Buyers And The Industry?

The reduction in GST from 28% to 18% on small cars and commuter bikes is a 10 percentage point cut, and this could mean huge savings for consumers. A hatchback that costs Rs 6 lakh (ex-factory), for example, could now be up to Rs 60,000 cheaper following GST reductions.

For the automobile sector, which has been facing dull sales, it is a festival booster dose. Locally made cars and two-wheelers are likely to get a boost in demand, while luxury cars and premium cars are also getting cheaper, albeit by a lesser margin.

For more details, check out:

• GST Rate Cut For Cars: Cess Removed, All Cars To Get Cheaper
• Why Buying A Small Car After September 22 Under The New GST Rule Could Save You Big Money
• GST Rate Cut On Cars: Hyundai Creta, VW Virtus, Mahindra Thar Roxx, And More Will Get CHEAPER!
• New GST Rates: GST Cuts on Large SUVs & Luxury Cars: Toyota Fortuner, Mercedes-Benz GLS, & More Will Become Affordable

When Do The Changes Kick In?

All the GST rate changes will be effective from September 22, 2025, a few weeks before the festival season. 

All-in-all, if you are planning to buy a new vehicle, then things do look happier and you should definitely wait till the new GST regime kicks in. This should make our festive season lighter on our pockets and happier for our families.

What do you think about the new GST slabs? Let us know in the comments!

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