GST Cut On Cars, SUVs And Two-Wheelers Likely Soon: What To Expect

The Indian government is preparing to give a major boost to the automobile sector with a new Goods and Services Tax (GST) regime. The plan is expected to bring down taxes on cars, SUVs, and two-wheelers, offering significant relief to prospective buyers.

At present, small cars attract 28% GST along with a cess of 1–3%. SUVs face an even steeper burden, with total taxation reaching up to 50% when cess is included. To make the structure more uniform, the government is considering dropping the current definition of SUVs under GST classification, which has long created confusion in the industry.

Prime Minister Narendra Modi hinted at these reforms during his Independence Day address, suggesting that tax relief may not just be limited to automobiles. Reports indicate that air conditioners and certain construction materials could also see reduced GST rates in the coming months.

Two Slab GST Structure

The new GST framework is expected to streamline tax categories into just two slabs:

• Merit goods with rates capped at 5%

• Standard goods taxed at 18%

This simplified structure could replace the multiple slabs that currently exist, making GST easier to apply and reducing disputes. While the government has not yet finalized the details, the rollout is being targeted around Diwali this year.

Likely Impact On Automobiles

Industry experts believe this reform could change the pricing landscape for vehicles in India. Small cars under ₹10 lakh and entry-level motorcycles are likely to see immediate benefits, making them more affordable for the masses. Electric vehicles are expected to continue at the existing concessional 5% GST rate, while luxury cars may not see any major tax cut.



Beyond lowering prices for consumers, reduced GST could also encourage higher production volumes, bring down component costs, and give a much-needed push to India’s automotive manufacturing sector. The move is being seen as a step toward stimulating demand and supporting long-term industry growth.

If implemented as planned, the new GST regime could mark one of the most impactful tax reforms for the automobile sector in recent years.