Key highlights
- GST on small cars and bikes reduced to 18%
- Cars below 1,200cc and bikes below 350cc to enjoy the new rates
- GST hiked on the ‘luxury goods’
As anticipated, the government has revealed the revised GST slabs for cars and bikes in India. The GST 2.0 offers some relief to the low engine capacity vehicles, while the big bikes and luxury cars become expensive. Read more below.
Also read: More than 50,000 jobs cut in German auto industry; recession?
What is the effect of GST 2.0 on cars?
In the newly revised GST slab, petrol cars with an engine capacity of 1,200cc or less will now attract 18% GST, instead of the earlier 28%. Additionally, the length of the car must be 4 meters or less to withstand the new GST rates.
Meanwhile, diesel cars belonging to the 500cc engine category of less capacity will also attract 18% GST instead of 28%. The 4-meter mark barrier remains the same for the diesel cars too.
However, luxury cars that were previously subjected to 28% GST+cess, which usually went as high as up to 48-50% tax with their powertrain, have now been capped at 40% irrespective of the engine and power capacity.
What is the effect of GST 2.0 on bikes?
The biggest relief comes for the small-capacity two-wheelers below 350cc, which own the majority of sales in India. Entry-level scooters and motorcycles like Activa and Splendor will now be subjected to 18% GST as opposed to 28% GST earlier. This will substantially reduce the prices of the majority of two-wheelers in India.
However, the bummer is that the two-wheeler above 350cc is now shifted to a very steep GST hike. Earlier, 350cc and above two-wheelers had to pay 28% GST, which has now been hiked to 40%. This will directly impact the sales of the performance bikes, and especially Royal Enfield motorcycles like the 650cc and 450cc range.
What is the effect on Electric Vehicles?
Continuing with the auto industry electrification propaganda, the government has not altered the 5% GST rates on electric vehicles. The electric cars and scooters customers will keep paying the 5% GST tax.
The new GST rates are set to be implemented from September 22, 2025.
Our say
The new GST 2.0 tax revision aims at improving the slowdown of automotive sales in India. While the newly reduced tax rates are inspiring, the motorcycles above 350cc will suffer a major setback with the 40% hike.
