New GST Rates Are Heaven Sent As All Bikes Under 350cc And Cars To Become Affordable!

In a historical rollout of new GST norms, all cars from a simple small hatch to an opulent luxurious vehicle, and bikes under 350cc are bound to become cheaper from September 22, 2025. However, bikes with engine sizes above 350cc will now attract a heavier tax. Here’s everything you need to know about what is possibly the best GST reform for the automotive industry to date.

All Cars Get Cheaper!

Yes, you read that right. Not just small cars with small displacement engines, even the luxury cars now attract smaller taxation. The compensation cess, which ranges between 1% to 22% based on various parameters, has now been deleted from the equation entirely. There’s just a uniform GST tax, which has been reduced from 28% to 18% for all sub-4m petrol, CNG and LPG vehicles with an engine size of up to 1200cc. Same applies for sub-4m diesel cars that have an engine displacement of up to 1500cc.

And while GST for hybrid, mid-size and SUVs has actually been increased, they still benefit in the larger scheme of things, thanks to no compensation cess. Hybrids get a marginal 3% relief, mid-size vehicles with up to 1500cc get a slightly higher 5% savings, while SUVs benefit from 10% tax savings.

Electric vehicles will still be taxed at 5% as there are no changes to their GST rates. As for luxury cars, they will attract savings of 8-10%, as they are now taxed a flat 40% GST.

What About Bikes?

For all the savings made with cars, the two-wheeler population might not be too pleased with the new GST rates, at least in the case for bigger bikes.

Motorcycles up to 350cc, like the Royal Enfield Bullet and the Royal Enfield Classic 350 will now be charged a flat 18% GST. This new deduction in taxation will cut the price of these bikes by several thousand rupees. 

However, for bikes bigger than 350cc, the government has categorised them in the ‘luxury or sin’ category, and slapped a heavy 40% tax, making them more expensive than before. So bikes like the Pulsar NS400Z and the Dominar 400, 400cc Triumph bikes and 390 range of KTM bikes will now be more expensive to own.

Even the imported bikes will now carry a heavier 40% tax in contrast to the previous 31%. Just like electric cars, there is no change to the taxation of electric two-wheelers either and they will still be charged a concessional 5% GST. 

Apart from passenger vehicles, even buses, trucks and ambulances are now uniformly charged at 18% in contrast to the previous 28% taxation. 

Confirmed Savings?

Yes. Apart from bikes bigger than 350cc, savings are more or less guaranteed. And given that there’s a relief on GST on even auto parts and components, the manufacturing costs will also come down. 

But what remains to be seen is the degree to which the carmakers will pass on the benefits to the consumer. Because, it is very well possible that the carmakers might gatekeep some of the taxation benefits to increase their own profit margins. So the exact extent of the savings is likely going to vary depending on the carmaker, and might not be a direct reflection of the figures in the tables above. 

In any case, if you were planning to buy a car anytime soon, holding the urge to bring it home until September 22 might be the right call. Because with the revised ex-showroom prices, you will also save on RTO charges, which are based on the ex-showroom price. Only if the government didn’t slap a higher tax on bigger bikes, it would’ve been a huge win for the entire automotive community.