In a big festive-season push, the GST Council has implemented sweeping reforms in the Goods and Services Tax (GST) structure for cars, bikes, and auto parts. At the same time, a new 40% slab has been introduced for premium and luxury vehicles (replacing the earlier ~50% rate that included cess). The new rates will take effect from September 22, 2025.
New GST Rates: What Gets Cheaper?
| Category | Earlier GST | New GST | Examples |
|---|---|---|---|
| Small Cars (Petrol, LPG, and CNG Vehicles ≤1200cc / Diesel ≤1500cc, length ≤4m) | 28% | 18% | Maruti Dzire, Kia Syros, Tata Punch |
| Bikes up to 350cc | 28% | 18% | Royal Enfield Bullet, Classic 350, Pulsar NS200 |
| Three-Wheelers | 28% | 18% | Auto-rickshaws, e-rickshaws |
| Compact Hybrids (≤4m) | 28% | 18% | – |
| Goods Transport Vehicles | 28% | 18% | Pickup trucks, delivery vans |
| Buses, Trucks, Ambulances | 28% | 18% | Commercial CVs |
| Auto Parts & Accessories (ending HS code confusion) | 28% | 18% | Engines, chassis, bodies, spares |
To put it in perspective, a hatchback priced at ₹6 lakh (ex-factory) could now cost up to ₹60,000 less.
New 40% Slab for Premium Vehicles
Earlier, luxury and premium vehicles attracted 28% GST + 22% compensation cess, taking the total tax burden close to 50%. Now, the GST Council has scrapped the cess and replaced it with a flat 40% GST slab.
- Big Bikes (above 350cc) – e.g., KTM 390 Duke, Triumph Speed 400, Bajaj Pulsar NS400, and most Royal Enfield bikes.
- Cars above 4m or with larger engines – e.g., Hyundai Creta, Kia Seltos, Tata Harrier, Mahindra XUV700.
- Premium Hybrids above 4m – e.g., Maruti Grand Vitara, Toyota Innova Hycross, upcoming Maruti Victoris.
- Luxury goods – Aircraft, yachts, and RVs for private use.
Maruti Brezza Caught Between Tax Slabs
Although the Maruti Suzuki Brezza is a sub-4m vehicle, its 1,500cc petrol engine pushes it into a higher tax bracket of 40% However, its rivals in the same segment now only attract 18% GST because they mainly come with 1.0-litre or 1.2-litre petrol units. For diesels, up to a 1.5-litre engine capacity is allowed at 18% in the sub-4m category.
Big Bikes Now Pay Luxury Duty
Earlier, motorcycles above 350cc in India were taxed at an effective rate of 31% (28% GST + 3% cess). With the new GST reforms, the slab has been revised to 40%, effectively putting mid- and large-capacity bikes in the same bracket as luxury and premium vehicles. This not only makes them more expensive for buyers but could also discourage innovation and new product development in this category, as manufacturers may hesitate to introduce fresh models in a heavily taxed segment.
Electric Vehicles Stay at 5%
No change for EVs – all electric cars, scooters, and three-wheelers continue at 5% GST. This keeps EVs the most tax-friendly mobility option.
Also See: No Tolls for EVs in Maharashtra: Here’s the List of Roads
Compensation Cess
Earlier, a compensation cess was imposed on top of the standard GST to compensate states for any revenue losses. Depending on the vehicle type, engine size and category, it ranged between 1% to 22%. However, with the latest GST reforms (GST 2.0), the compensation cess has been removed for all categories.
Author’s Take
The GST Council’s new reforms make owning everyday vehicles cheaper, but at the same time make bigger cars and bikes more expensive.
Cutting GST from 28% to 18% on small cars, two-wheelers under 350cc, three-wheelers, and even auto parts will directly benefit middle-class families and transport operators, as vehicles will now cost noticeably less. Removing confusion in auto parts taxation also helps both manufacturers and consumers.
On the other hand, the introduction of a flat 40% GST on larger cars and motorcycles categorises them as “luxury” items. This means popular SUVs like Creta, Seltos, and bikes above 350cc (previously taxed lower) will now cost more. Electric vehicles stay at just 5% GST, making them the cheapest option tax-wise.
This new structure creates a clear divide: affordable mobility is being pushed strongly, but premium and enthusiast vehicles may see slower demand, and companies might hesitate to launch new models in these segments. In short, the reform favours mass buyers but could discourage aspiration and innovation in the premium space.
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