Exciting news for automobile lovers! In a significant relief for car and bike buyers, the Government of India has announced a reduction in Goods and Services Tax (GST) on small cars and two-wheelers from 28% to 18%.
This change will take effect on September 22, 2025, just in time for the festive season. It’s important to note that this offer is only valid for cars with lengths under 4 meters and engines smaller than 1300cc.
Additionally, it applies to bikes with engines of 350cc or less. This reduction means that customers planning to purchase new small cars or bikes will benefit from a 10% decrease in price.
What has Changed?
Previously, all cars classified as “small cars” and two-wheelers up to 350cc were subject to a 28% GST, making them more expensive for budget-conscious buyers.
With the new GST rate set at 18%, the prices of popular hatchbacks, entry-level sedans, compact SUVs, and commuter motorcycles are expected to decrease significantly by 8-10%.
Which Vehicles Will Get Cheaper?
The GST reduction applies to small cars (with lengths up to 4 meters, petrol engines of 1200cc or less, and diesel engines of 1500cc or less) and two-wheelers with engines up to 350cc.
As a result, models from manufacturers such as Maruti Suzuki, Hyundai, Tata Motors, Kia, Honda, Bajaj, Hero MotoCorp, and Royal Enfield (for 350cc bikes) will experience price reductions.
Impact on Customers
For buyers, this move could result in savings ranging from Rs 50,000 to Rs 1.5 lakh, depending on the model.
For instance: A hatchback priced at Rs 10 lakh (ex-showroom) would have cost approximately Rs 12.8 lakh with the previous 28% GST. Now, with the new 18% GST, the on-road price is expected to drop to around Rs 11.8 lakh, resulting in a savings of nearly Rs 1 lakh.
What About Bigger Cars and SUVs?
While small cars and bikes will see a drop in prices, larger cars and SUVs will fall under a new 40% GST slab. This means that mid-size SUVs, premium sedans, and luxury cars may actually become more expensive.
Electric vehicles (EVs) will remain unchanged, continuing to enjoy a GST rate of 5%, as per the previous structure. Industry experts consider this move a bold step to revive demand in the automobile sector.
With the festive season approaching, automakers are anticipating a strong boost in sales, particularly in the hatchback and commuter bike segments.
Car dealers have already reported an increase in inquiries following the announcement, and companies may soon introduce special festive offers in conjunction with the GST reduction to attract more buyers.
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Key Takeaway
Starting September 22, 2025, small cars and bikes in India will become more affordable as the GST decreases from 28% to 18%.
This change is expected to make car and bike ownership more accessible for middle-class families and stimulate overall demand in the automotive industry.
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