Big Surprise For Car & Bike Buyers, GST Reform Slashes Prices Starting This Navaratri

New Delhi: The GST Council has introduced a major tax reform that will make small cars, bikes, and hybrid vehicles cheaper. This change is part of the council’s move to simplify the GST structure from four tax slabs to just two rates — 5 percent and 18 percent. The new rates will come into effect from September 22, 2025, which is the first day of Navaratri.

The GST Council has approved significant reforms today. These reforms have a multi-sectoral and multi-thematic focus, aimed at ensuring ease of living for all citizens and ease of doing business for all: Office of Finance Minister Nirmala Sitharaman pic.twitter.com/7yg9zELOvs

— ANI (@ANI) September 3, 2025

Lower GST for Small Cars and Bikes

Under the new system, small petrol, LPG, and CNG cars with engine sizes up to 1,200 cc and length not exceeding 4,000 mm will now attract only 18 percent GST, instead of the earlier 28 percent. Similarly, diesel cars with up to 1,500 cc engines and under 4,000 mm length will also fall under the 18 percent GST bracket. This change will reduce the cost of these vehicles significantly.

GST revised on automobiles!

Even larger capacity vehicles will see a price drop due to removal of cess.#GSTCouncilMeeting #GSTReforms pic.twitter.com/Jb1vSqgBxv

— Auto News India (ANI) (@TheANI_Official) September 4, 2025

Bikes Up to 350cc Also Get Cheaper

Motorcycles with engine capacity up to 350cc will now attract 18 percent GST, down from 28 percent. This is expected to benefit the large number of two-wheeler buyers in India, especially in rural and semi-urban areas.

Higher Tax for Bigger and Luxury Vehicles

Vehicles above 1,200 cc engine size, longer than 4,000 mm, and motorcycles above 350 cc will now attract a special 40 percent GST rate. This will also apply to racing cars and luxury SUVs. These are considered premium products and will be taxed higher under the revised GST.

EVs and Hybrids Benefit Too

Electric Vehicles (EVs) will continue to attract just 5 percent GST, helping India’s push towards clean and green mobility. Small hybrid cars will also benefit from the new 18 percent GST rate.

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Auto Components Get Tax Relief

In another welcome move, GST on all auto components has been reduced to 18 percent from 28 percent. This will help manufacturers, especially small and medium suppliers, by cutting costs and improving profit margins.

Industry Welcomes the Reform

The automobile industry has welcomed the GST reform, calling it a long-awaited decision. Companies like Mercedes-Benz India, Mahindra & Mahindra, and ACMA have said the move will boost consumption, support clean transport, and make Indian auto components more competitive globally.

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Tractors, Farm Equipment Also to Benefit

The reform will also help reduce prices of tractors and farm machinery, making them more affordable for farmers. Lower prices for commercial vehicles will reduce transport costs and support rural growth.

Simplified Tax Structure

This reform simplifies GST rates by removing the 12 percent and 28 percent slabs, merging most items into either 5 percent or 18 percent. Only a few luxury or harmful products will face the special 40 percent rate, ensuring fairness and ease of compliance.