GST Council Meeting: Small Cars, Motorcycles Below 350cc Now To Enjoy Reduced Tax

The first day of the 56th GST Council meeting 2025 has concluded with Union Finance Minister Nirmala Sitharaman announcing the new tax infrastructure for the common man. This brings a few major changes in the auto industry, with the union minister announcing revisions in the tax slab for vehicles. Based on the announcement made during the press conference, the government has reduced GST on small cars, motorcycles equal to or below 350 cc from 28 per cent to 18 per cent.

Furthermore, the commercial vehicles like buses, trucks, and ambulances will now have a uniform GST of 18 per cent, which is down from 28 per cent. Similarly, the auto parts will have a GST of 18 per cent irrespective of their HS codes. Falling in the same bracket will be three-wheelers with 18 percent of GST.

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"GST has been reduced from 28% to 18% on small cars and motorcycles with engine capacities equal to or below 350 cc. GST has also been reduced from 28% to 18% on buses, trucks, and ambulances. There is a uniform rate of 18% on all auto parts, irrespective of the HS code. Three-wheelers are also reduced from 28% to 18%," FM said.

In contrast, the vehicles classified within the category of luxury items, such as mid-size and large cars, as well as motorcycles with engine capacities greater than 350 cc, will fall under the 40 per cent GST slab. This category also includes helicopters, airplanes, yachts, and other vessels for pleasure or sports.

The changes in the tax structure with two slabs also mean bringing uniformity, removing the cess that was previously levied on vehicles. All of these revisions in taxation will be implemented from 22 September 2025, right before the festive season, when the auto sector anticipates greater sales. It will also bring relief for the vehicle buyers, giving a boost to the rather sluggish sales in the industry in the last quarter.