GST 2.0: Lower Tax on Small Cars and Bikes, How to Maximize the Benefit

New Delhi: Good news for car and motorcycle buyers! On September 3, the GST Council approved a reduction in GST for small cars and low-power motorcycles. This change will come into effect from September 22, 2025. Here’s how you can take full advantage of the tax cuts.

GST Cut Only for Small Cars and Low-Power Bikes

It’s important to note that the GST reduction applies only to small cars and low-power motorcycles:

• Petrol, CNG, and LPG cars up to 1200cc power and 4000mm length will now attract 18% GST instead of 28%.

• Diesel cars up to 1500cc power and 4000mm length will also see GST drop from 28% to 18%.

This means buyers of small cars will save 10% in GST.

Higher Tax on Bigger Cars

• Popular small cars like Maruti Swift, Hyundai i20, Tata Altroz, and Honda Amaze will now cost less.

• Cars with more than 1200cc power and longer than 4000mm (petrol, CNG, LPG) will now attract 40% GST, up from the previous 28%.

• Diesel cars above 1500cc power and 4000mm length will also be taxed at 40%.

In short, the GST benefit is limited to small cars, while larger or premium vehicles will now be more expensive.

Examples of vehicles that will get costlier: Premium SUVs, imported models, Toyota Fortuner, Mahindra XUV700, and similar luxury cars. The government expects that higher-income buyers can afford these increases, whereas middle-class buyers benefit from reduced GST on small cars.

Motorcycles

• Bikes with up to 350cc power will see a GST reduction from 28% to 18%, making them cheaper.

• Bikes above 350cc will face a 40% GST, making premium bikes like Royal Enfield 650cc, Harley Davidson, KTM more expensive.

When to Buy

• Expensive cars or high-power motorcycles: Buy before September 22, as GST rates will increase for these vehicles.

• Small cars and low-power motorcycles: Wait until September 21 to make your purchase to benefit from the reduced 18% GST. After that, dealers will charge the new GST rates.

Key Takeaway:

• Small cars & low-power bikes: Wait until September 21 for cheaper rates.

• Premium cars & high-power bikes: Buy before September 22 to avoid paying higher GST.

This strategic timing can save buyers a significant amount during the festive season and new GST implementation.