GST Cut for Small Cars, Hike to 40 per cent for SUVs and Big Bikes
ECONOMY & POLICY

GST Cut for Small Cars, Hike to 40 per cent for SUVs and Big Bikes

The 56th GST Council, chaired by Finance Minister Nirmala Sitharaman, has approved major changes to the Goods and Services Tax (GST) structure for motor vehicles, reducing rates on small cars and motorcycles while imposing a flat 40 per cent GST on premium vehicles, including SUVs and large motorcycles.
The revised rates, which will come into effect from 22 September 2025, offer relief to buyers of mass-market vehicles, while increasing the tax burden on the premium automotive segment.

Key Changes:
  • Small petrol cars with engine capacity up to 1200cc and length not exceeding 4000 mm will now attract 18 per cent GST, down from 28 per cent.
  • A similar reduction applies to diesel vehicles with engine capacity up to 1500cc and length under 4000 mm.
  • Motorcycles and mopeds up to 350cc will also see GST reduced from 28 per cent to 18 per cent.
  • Electric vehicles (EVs) across all segments — two-wheelers, small cars, electric SUVs, and luxury EVs — will continue to attract 5 per cent GST, with no change announced.
These changes are expected to benefit Maruti Suzuki, Hyundai, Tata Motors, and two-wheeler manufacturers focusing on commuter segments.

Premium Segment Hit:
  • Motorcycles above 350cc, including models from Royal Enfield, will now attract 40 per cent GST, up from 28 per cent.
  • The new 40 per cent GST rate also applies to petrol vehicles over 1200cc or longer than 4000 mm, and diesel vehicles over 1500cc or longer than 4000 mm, which includes most SUVs and premium sedans.
  • Plug-in hybrid vehicles with larger engine capacities or extended body lengths are also brought under the 40 per cent slab.
Previously, such vehicles were taxed at 28 per cent GST plus a compensation cess of 17–22 per cent, resulting in an effective tax burden of 45–50 per cent. Under the new regime, they will be taxed at a flat 40 per cent with no cess, streamlining the tax structure but maintaining a high rate for large vehicles.

Other Updates:
  • A 10 per cent GST reduction will apply to:
  • Ambulances
  • Road tractors for semi-trailers with engine capacity over 1800cc
  • Three-wheeled motor vehicles
At present, passenger vehicles fall under a multi-slab GST and cess structure. This latest revision seeks to simplify the system by aligning taxes with vehicle size and fuel type, promoting affordability and efficiency in the entry-level segment while levelling higher taxes on premium and high-emission vehicles.
The Council’s move is seen as a push towards rationalising the tax burden on common-use vehicles while discouraging larger, high-emission models in line with India’s climate and mobility goals. 

The 56th GST Council, chaired by Finance Minister Nirmala Sitharaman, has approved major changes to the Goods and Services Tax (GST) structure for motor vehicles, reducing rates on small cars and motorcycles while imposing a flat 40 per cent GST on premium vehicles, including SUVs and large motorcycles.The revised rates, which will come into effect from 22 September 2025, offer relief to buyers of mass-market vehicles, while increasing the tax burden on the premium automotive segment.Key Changes:Small petrol cars with engine capacity up to 1200cc and length not exceeding 4000 mm will now attract 18 per cent GST, down from 28 per cent.A similar reduction applies to diesel vehicles with engine capacity up to 1500cc and length under 4000 mm.Motorcycles and mopeds up to 350cc will also see GST reduced from 28 per cent to 18 per cent.Electric vehicles (EVs) across all segments — two-wheelers, small cars, electric SUVs, and luxury EVs — will continue to attract 5 per cent GST, with no change announced.These changes are expected to benefit Maruti Suzuki, Hyundai, Tata Motors, and two-wheeler manufacturers focusing on commuter segments.Premium Segment Hit:Motorcycles above 350cc, including models from Royal Enfield, will now attract 40 per cent GST, up from 28 per cent.The new 40 per cent GST rate also applies to petrol vehicles over 1200cc or longer than 4000 mm, and diesel vehicles over 1500cc or longer than 4000 mm, which includes most SUVs and premium sedans.Plug-in hybrid vehicles with larger engine capacities or extended body lengths are also brought under the 40 per cent slab.Previously, such vehicles were taxed at 28 per cent GST plus a compensation cess of 17–22 per cent, resulting in an effective tax burden of 45–50 per cent. Under the new regime, they will be taxed at a flat 40 per cent with no cess, streamlining the tax structure but maintaining a high rate for large vehicles.Other Updates:A 10 per cent GST reduction will apply to:AmbulancesRoad tractors for semi-trailers with engine capacity over 1800ccThree-wheeled motor vehiclesAt present, passenger vehicles fall under a multi-slab GST and cess structure. This latest revision seeks to simplify the system by aligning taxes with vehicle size and fuel type, promoting affordability and efficiency in the entry-level segment while levelling higher taxes on premium and high-emission vehicles.The Council’s move is seen as a push towards rationalising the tax burden on common-use vehicles while discouraging larger, high-emission models in line with India’s climate and mobility goals. 

Next Story
Infrastructure Transport

Sonowal Unveils Eight Projects at NMPA’s Golden Jubilee

Union Minister for Ports, Shipping and Waterways, Shri Sarbananda Sonowal, inaugurated the Curtain Raiser Ceremony of the Golden Jubilee Celebrations of the New Mangalore Port Authority (NMPA) at Bharat Mandapam. To commemorate the milestone, he unveiled eight major maritime infrastructure projects designed to strengthen India’s port network, enhance logistics performance, and promote sustainability. These include a modern cruise terminal, new covered storage facilities, a 150-bed multi-speciality hospital, expanded truck terminals, and improved port access infrastructure aimed at enhancing..

Next Story
Infrastructure Energy

India To Boost US LPG Imports, Cut Middle East Reliance

India is planning to reduce imports of liquefied petroleum gas (LPG) from the Middle East as state-owned refiners prepare to ramp up purchases from the United States, according to sources familiar with the matter. The move aligns with New Delhi’s efforts to expand energy cooperation and secure a broader trade deal with Washington. State refiners have already notified their traditional LPG suppliers in Saudi Arabia, the United Arab Emirates, Kuwait and Qatar of the potential reduction in imports. Although the exact size of the supply cut was not disclosed, earlier reports suggested that Indi..

Next Story
Infrastructure Energy

UK Sanctions Nayara Energy in Crackdown on Russian Oil

The United Kingdom has announced fresh sanctions on 90 entities, including Indian refiner Nayara Energy Limited, in its latest bid to curb Russian oil revenues and weaken President Vladimir Putin’s war funding. The sanctions, unveiled jointly by the Foreign, Commonwealth and Development Office (FCDO) and the UK Treasury, aim to disrupt networks supporting Moscow’s crude exports amid the ongoing war in Ukraine. According to the FCDO, the new restrictions are intended to “strike at the heart of Putin’s war funding” by targeting firms and assets that enable Russia’s energy trade. “..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?