GST 2.0: Buying a Car or Bike Soon? Key Tax Rate Changes You Must Know

Thinking of buying a car, bike, or tractor? The 56th GST Council meeting has reshaped the tax structure. From September 22, 2025, small cars and affordable motorcycles will see GST drop from 28% to 18%, making them cheaper. On the flip side, luxury cars, SUVs, and premium bikes will attract a steep 40% GST, up from 28%, pushing their prices higher.

Cars: Small Winners, Big Losers

Small cars just got a price cut. Petrol, CNG, and LPG cars with engines up to 1200cc and under 4000 mm in length, along with diesel cars up to 1500cc, will now attract 18% GST instead of 28%. This means popular hatchbacks and compact sedans like the Maruti Swift, Hyundai i20, Tata Altroz, and Honda Amaze are set to become more affordable.

Larger Cars & SUVs Get Dearer

On the flip side, bigger vehicles are moving into the 40% GST slab (up from 28%). This includes petrol/CNG/LPG cars above 1200cc, diesel cars above 1500cc, or any model longer than 4000 mm. Buyers of Toyota Fortuner, Mahindra XUV700 (top trims), and imported luxury sedans will feel the price hike.

Bikes: Budget-Friendly Rides Turn Cheaper

Two-wheeler buyers also gain from the tax cut. Motorcycles and scooters with engine capacity up to 350cc will now fall under 18% GST, down from 28%. This covers most mass-market scooters and commuter bikes, making everyday rides lighter on the pocket.

Premium Bikes Get Pricier

Motorcycles with engines above 350cc will now fall under the 40% GST slab, up from 28%. This means premium models like the Royal Enfield 650cc, Harley-Davidson, and high-end KTM bikes will become significantly more expensive for enthusiasts.

Relief for Farmers & Rural Buyers

Tractors - except very high-capacity road tractors - and essential parts such as tyres, brakes, radiators, and clutches will now attract only 5% GST. This move is set to ease costs for farmers and rural communities.

Three-Wheelers Become More Affordable

Auto-rickshaws and other three-wheelers will also benefit from a rate cut, with GST now reduced to 18%, making them more accessible for everyday buyers and operators.

Commercial Vehicles Get Relief

Goods carriers, including trucks and lorry chassis, will now be taxed at 18% GST instead of 28%. This cut is expected to reduce operating costs for fleet owners and bring some relief to the logistics sector.

EVs Stay Untouched

Electric vehicles remain in the 5% GST slab, with no change in rates. Prices of popular models from Ather, Ola Electric, and TVS stay the same, dismissing earlier speculation of a hike to 18%.

Hybrids & Fuel-Cell Push

Compact hybrids (petrol up to 1200cc, diesel up to 1500cc, under 4000 mm length) will attract 18% GST, while larger hybrids move to the 40% bracket. Meanwhile, hydrogen fuel-cell vehicles enjoy a low 5% GST, reflecting the government’s clear push toward greener mobility.

No Extra Cess, Just a Flat Rate

Earlier, large cars and SUVs attracted both GST and an additional compensation cess. The Council has now simplified the structure - the 40% GST rate is final and all-inclusive, with no separate cess on top.

What It Means for Buyers

Good news for budget buyers: Hatchbacks, compact sedans, small SUVs, and two-wheelers under 350cc will soon cost less once manufacturers pass on the benefit.

Tough luck for premium buyers: Luxury cars, high-end SUVs, imported sedans, and superbikes will get significantly pricier after September 22, 2025, as GST jumps from 28% to 40%. Buyers eyeing these vehicles may want to purchase before the hike kicks in.

Commercial edge: Lower taxes on trucks and other commercial vehicles could gradually reduce transport and logistics costs, benefitting businesses in the long run.


Disclaimer: The information provided in this article is based on the announcements made during the 56th GST Council meeting. Actual vehicle prices may vary depending on manufacturers, dealers, state-level charges, and implementation timelines. Readers are advised to check with official government notifications and authorized dealers before making any purchase decisions.