TV
In a landmark reform, the Government of India has rationalised GST rates across the automobile sector, aiming to make vehicles more affordable, spur domestic demand, and empower MSMEs. The move complements flagship initiatives like Make in India, the Production Linked Incentive (PLI), and the National Logistics Policy, while also supporting job creation, cleaner mobility, and export competitiveness.
Two-Wheelers and Small Cars Become Cheaper
Bikes up to 350cc now attract only 18% GST, down from 28%, making them more affordable for youth, farmers, gig workers, and small traders, especially in rural India. Similarly, small cars (<1200cc petrol, <1500cc diesel, under 4m length) will see tax reduced to 18%, encouraging first-time buyers and boosting sales in smaller towns.
Relief for Large Cars and Auto Components
The GST on large cars has been simplified to a flat 40%, with cess removed. This not only lowers effective costs for aspirational buyers but also ensures full input tax credit. Meanwhile, auto components have been reduced to 18%, benefitting manufacturers and ancillary MSMEs.
Big Gains for Agriculture and Logistics
Tractors under 1800cc will now be taxed at just 5%, with parts such as tyres and pumps also slashed to 5%. This will accelerate farm mechanisation, benefiting both domestic farmers and exports. Commercial goods vehicles and buses now attract 18% GST, reducing capital costs, lowering freight rates, and improving logistics efficiency, all in line with PM Gati Shakti and the National Logistics Policy.
A Push Towards Aatmanirbhar Bharat
The rationalisation provides policy certainty, stimulates fresh investment, and incentivises cleaner, modern transport. With the auto sector supporting over 3.5 crore jobs, these reforms will strengthen MSMEs, promote financial inclusion, and pave the way for a globally competitive, technology-driven manufacturing ecosystem.
