India’s new GST cuts small car, bike taxes to 18%, raises luxury car rate to 40%, prompting big price drops from top automakers. Photo: freepik
The Next Gen GST reforms announced by Finance Minister Nirmala Sitharaman earlier this month have officially come into effect, significantly altering the tax structure for automobiles. The changes are expected to make several categories of vehicles more affordable for buyers.
Under the revised rates, vehicles and motorcycles with engines up to 350cc will now be taxed at 18 percent GST, down from the earlier 28 percent slab. This reduction is aimed at making entry-level vehicles more accessible to consumers.
Two-wheelers with engines above 350cc and larger cars are now categorized under the 40 percent slab for luxury goods, while electric vehicles will continue to be taxed at a minimal 5 percent rate.
Small cars -defined as those with petrol engines up to 1,200cc or diesel engines up to 1,500cc, and measuring no more than 4,000 mm in length – will also benefit from the tax changes.
These vehicles will now attract 18 percent GST, compared to the earlier 28 percent, making popular models such as the Maruti Suzuki Alto and Hyundai i10 more affordable.
Vehicles that do not qualify as small cars will now face a flat 40 percent GST rate. Previously, these vehicles were taxed at 28 percent GST, along with an additional cess of up to 22 percent, bringing the total to nearly 50 percent.
The new structure simplifies the tax regime while slightly reducing the burden on larger cars.
In response to the revised GST rates, several major automakers have announced price cuts across their product lines to pass on the benefits to customers.
Tata Motors was the first to revise prices, offering reductions of up to ₹1.55 lakh.
Tiago: Price cut of up to ₹75,000
Tigor: Reduction of up to ₹80,000
Price cuts were also applied to the Altroz, Punch, Nexon, Curvv, Harrier and Safari models.
Jeep India offered some of the steepest cuts, with reductions of up to ₹4.84 lakh.
Compass: New price ₹17.73 lakh, down from ₹18.99 lakh.
Meridian: Reduced to ₹23.33 lakh from ₹24.99 lakh.
SUV manufacturer Mahindra announced price drops across key models.
Bolero, Bolero Neo, XUV 3XO and Thar 2WD (Diesel) now fall under the 18 percent tax bracket.
Other Mahindra vehicles will attract the 40 percent GST rate.
Maruti Suzuki cut prices across its lineup:
Alto K10: Reduced by ₹1,07,600, now priced at ₹3,69,900.
Grand Vitara: Also reduced by ₹1,07,600, now priced at ₹10,76,500.
Renault India slashed prices by up to ₹96,395.
Kiger: Price dropped from ₹11,29,995 to ₹10,33,600.
Kwid Climber: Reduced from ₹6,44,995 to ₹5,90,000.
Zubair Amin is a Senior Journalist at NewsX with over seven years of experience in reporting and editorial work. He has written for leading national and international publications, including Foreign Policy Magazine, Al Jazeera, The Economic Times, The Indian Express, The Wire, Article 14, Mongabay, News9, among others. His primary focus is on international affairs, with a strong interest in US politics and policy. He also writes on West Asia, Indian polity, and constitutional issues. Zubair tweets at zubaiyr.amin
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