GST Rate Cut: Cars To Become More Affordable But THESE Bikes Will Cost More Now

GST 2.0:  The government announced a reshuffle in the GST rates on September 3, 2025. The automotive industry’s long-standing demand for slashing taxes on small cars and bikes was addressed by the government, and the small cars and bikes under the 350cc category are set to become more affordable from September 22 onwards. While the small cars and bikes were taxed at 28 per cent, they will now be taxed at 18 per cent after a reduction of 10 percentage points.

GST Rate Cut: Why Was It Needed?

The automotive industry has been witnessing a decline in the entry-level consumers in the market. Factors such as low income growth and rising inflationary pressures can be attributed to this decline. The recent reduction in the tax rate by the government is expected to boost the demand for small cars and bikes.

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GST 2.0: THESE Cars And Bikes To Become Cheaper

The reduction of 10 percentage points in tax rates will apply to ‘Small Cars’ and bikes under the 350cc category. Thus, it is important to understand the definition of small cars here. Cars that do not have a length of more than 4 meters (4000mm) and have a petrol engine under 1200cc, or a diesel engine under 1500cc, are called small cars. Earlier, these cars were taxed at 28 per cent, whereas now these cars, along with bikes under the 350cc segment, will be taxed at 18 per cent.

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GST 2.0: What About Bigger Cars And Bikes?

The slabs have also been reshuffled, and while earlier there used to be a total of 4 slabs, now there will be a total of two slabs- 5 per cent for essentials and 18 per cent on non-essentials. There is a new slab for ‘sin goods’, and the items that fall into this slab will be taxed at 40 per cent now. Earlier, bigger cars were taxed at 43-50 per cent with cess included. The bigger bikes, on the other hand, were earlier taxed at 30-32 per cent, whereas they will now be taxed at 40 per cent.