GST Changes On Cars, Motorcycles, EVs: Clearly Explained

India’s tax system has just gotten an overhaul. The GST Council has announced a new regime that will bring about major shifts in the taxes imposed on automotive models and further tweak their effective prices. The new system, set to kick in on September 22, 2025, will benefit buyers of small cars and commuter bikes. Larger vehicles, SUVs in particular, will be taxed higher than before. Here’s everything you need to know about the revised GST structure and its impact on the prices of various car and bike models.

Mass-Market Cars To Get Cheaper

The biggest relief comes for mass-market vehicles- both cars and motorcycles. Previously, small cars (and compact SUVs) used to attract a GST of 29 per cent. Two-wheelers with engine capacities of up to 350cc were taxed at 28%. The new regime imposes a lower 18% GST on small cars and budget two-wheelers.

It defines small cars as ‘models with lengths of up to four meters and engine capacities of up to 1200cc if petrol and 1500cc if diesel. Motorcycles with engine capacities less than or equal to 350cc qualify for the new slab.

The small car and compact SUV segments will benefit a lot under the new regime. Small hatchback models like the Tata Tiago and Hyundai i10 will qualify for the new slabs. The top-spec Tiago now has an ex-showroom price of Rs 7.39 lakh. Under the new regime, it will come down to Rs 6.7 lakh.

Popular sub-compact SUV models like Tata Punch, Hyundai Exter, Venue, Kia Sonet, Skoda Kylaq, Maruti Brezza, Mahindra XUV 3XO, Tata Nexon, and others will also benefit. These will get cheaper.

The Skoda Kylaq for example, has an ex-showroom price of Rs 13.99 lakh for the range-topping variant. This is inclusive of 28% GST. With the slabs dropping to 18%, we will soon see the ex-showroom price dropping to 12.8 lakh rupees. The SUV will pack more value then.

Mid-Size SUVs, Large SUVs, Luxury Vehicles To Get Cheaper

Mid-size and large SUVs now move to a higher tax slab of 40%. The previous regime defined SUVs using three factors - length, engine capacity, and ground clearance. SUVs with lengths of over four meters, with engines larger than 1500cc, and ground clearance of over 170 mm used to attract a total tax of up to 50%! Cars with engines larger than 1500cc, in general, used to be taxed at 40-50 per cent. These were inclusive of 17-22 per cent cess.

The new framework has done away with the compensation cess and put these under a new, uniform slab of (flat) 40%. This means that some of the high-end models could even become slightly cheaper!

Mid-size SUVs like the Hyundai Creta may remain largely unaffected by the revision, if not get slightly more affordable. Luxury cars and SUVs are likely to get significantly cheaper as they are now taxed 10% lesser than before.

For instance, the Harrier Fearless X+ trim has an ex-showroom price of Rs 24.44 lakh. With the new slabs in place, this could come down to around Rs 22.8 lakh, a 1.6 lakh rupee price drop. Expect similar price reduction on the likes of the Mahindra Scorpio-N and MG Hector.

Budget Motorcycles To Get Cheaper, Mid-Capacity And Above To Be Taxed Higher

The new regime levies 18% GST on budget two-wheelers (with engine capacities of up to 350cc). These were previously taxed at 28%. Models like TVS Raider, Hero Splendor, and other small capacity motorcycles will get cheaper. The top-spec Splendor now has an ex-showroom price of Rs 82,148. Under the new regime, this is expected to come down to Rs 75,730.

This also saves models like the hot-selling Royal Enfield Hunter 350, Classic 350, etc from being price hikes. These, in fact, are set to get even more affordable. The Royal Enfield Classic 350 which currently has an ex-showroom price of Rs 2.3 lakh, will fall to Rs 2.1 lakh.

Let's now take the case of the Himalayan 450. It comes with a 450cc engine and has an ex-showroom price of Rs 2.98 lakh for the Hanle Black colour. This includes a GST of 28%. When the taxes are raised to 40%, the ex-showroom price for this trim will stand at Rs 3.2 lakh.

GST On Hybrid Cars

Hybrid vehicles will be taxed based on their lengths and engine capacities, much the same way as is mentioned above. This also means that their prices are unlikely to see a major drop. The drop, if anything, will be marginal.

EV Taxes Remain Unaffected

In the early phases of EV revolution here, India had announced a rather aggressive GST of 5% on battery electric models. Manufacturers capitalised on these for building cost-effective products and pricing them aggressively, eventually leading to widespread adoption.

Earlier rumours had suggested that the government was likely mulling an 18% slab on electric vehicles as well. This would have had affected the EV space adversely. However, the GST Council has kept the actual taxes the same as before. Electric vehicles will continue to be taxed at 5%. EV prices- in both two and four-wheeler segments- will remain untouched.

Commercial Vehicles, Three Wheelers And More

Last mile mobility solutions, small commercial vehicles, and people movers like auto rickshaws will get cheaper under the new framework. The same applies to buses, trucks, ambulances and other commercial vehicles as well.

A uniform 18% GST has been imposed on the auto-parts sector. This should make life easier for manufacturers, dealers and suppliers. The previous classification code-based taxation is no more.