GST Council Cuts Tax on Small Cars and Bikes Under 350cc Ahead of Festive Season

The GST Council’s recent verdict is set to reshape India’s entry-level auto market, bringing welcome relief for those looking at affordable mobility solutions. With GST on small cars and motorcycles under 350cc now pared down from 28 per cent to an 18 per cent slab, first-time buyers and urban commuters have reason to celebrate. This move, announced just ahead of the festive season, positions such vehicles to become more accessible for cost-conscious households across the country. The new tax slabs are set to take effect from 22 September, giving manufacturers and dealerships a brief window to recalibrate pricing and promotional strategies.

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The revised tax rate applies to hatchbacks and compact sedans with engine capacities up to 1.2 litres, as well as mainstream commuter motorcycles and scooters not exceeding 350cc. For everyday Indian motorists, this means a direct reduction in ex-showroom prices, putting personal transport within easier reach and potentially shrinking the gap between two-wheeler and compact car ownership.

Automakers, particularly those with a strong small car and commuter bike portfolio, have welcomed the Council’s intervention. The sector, which had seen sluggish demand due to input cost pressures and customer hesitancy, is optimistic about consumer footfall picking up, especially in the run-up to Diwali and beyond. Dealer circles are already reporting a noticeable uptick in enquiries and pre-bookings.

GST Hike on Large-Capacity Bikes

There is, however, a distinct dampener for buyers of large-capacity motorcycles—those above 350cc. While such bikes previously attracted an effective tax rate of 31 per cent (28 per cent GST plus a 3 per cent cess), the new reforms push this up sharply to 40 per cent, placing them alongside sin goods like alcohol and tobacco. This steeper slab could impact demand in the performance motorcycle segment, already considered a niche in the Indian market.

GST Rates Hold Steady for Electric Vehicles

Interestingly, GST rates for electric vehicles remain unchanged at 5 per cent, bringing relief to players in the EV segment, especially luxury brands that had feared a potential hike.

The decision aligns with the government’s sustained drive towards electric mobility. Luxury EVs continue to witness higher adoption, logging an impressive 8 per cent versus the broader auto sector’s industry average of 2 per cent.

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Both industry watchers and buyers are keenly awaiting the impact of these fiscal shifts as India prepares for the festive rush.