New GST Slabs From Sept 22: How Your Next Car Or Bike Could Get Cheaper

The Goods and Services Tax (GST) Council, chaired by Union Finance Minister Nirmala Sitharaman, is set to implement a simplified two-slab GST structure by around September 22, 2025, to boost festive demand in India, according to sources.

The rollout coincides with the Navratri celebrations, potentially providing a timely stimulus for the auto sector.

The GST Council, comprising Union and state finance ministers, is scheduled to meet on September 3-4 in the national capital. The meeting will focus on the group of ministers’ (GoM) recommendations on rate rationalisation, compensation cess, and insurance levies. Notifications for the new slabs are expected five to seven days after the Council’s decision.

Proposed Two-Slab GST Structure
The Centre has proposed a simplified GST structure consisting of two main slabs: 5% and 18%, classifying goods and services as ‘merit’ and ‘standard’ categories. Additionally, a special 40% GST will apply to ultra-luxury cars and sin goods, while select labour-intensive items will retain concessional rates of 0.1%, 0.3%, or 0.5% to support employment-heavy sectors.

Who Stands to Gain?
The biggest beneficiaries of the GST cut will be buyers of small cars and commuter two-wheelers, which constitute a major share of sales in India. Analysts estimate that entry-level cars could become cheaper by Rs 20,000–25,000, providing meaningful relief for price-sensitive households.

Premium and luxury vehicles, however, may see little benefit due to their shift to the new 40% tax bracket. Ravi Bhatia, MD of JATO Dynamics India, said, “If implemented without additional levies, the proposed GST cut should meaningfully lift demand for entry-level models by improving affordability, particularly in small hatches and compact SUVs.”

Impact on Vehicles and Demand
Popular hatchbacks and compact sedans like the Maruti Alto K10, WagonR, Swift, Baleno, Dzire, Hyundai Grand i10 Nios, Tata Tiago, and Tigor are expected to become more affordable. Compact SUVs such as the Maruti Brezza, Hyundai Venue, Kia Sonet, and Tata Nexon may also benefit, boosting sales in both urban and rural markets.

Two-wheelers, particularly commuter-focused models, could see stronger demand in rural and semi-urban areas. Bhatia added, “The segments best placed to benefit are small cars and CNG variants, given their price sensitivity and importance in mass mobility. Lower taxes could also be a catalyst for first-time purchases, especially among younger buyers and rural households.”

Revenue Considerations
While the GST reduction is expected to stimulate demand, it could lead to a short-term dip in government revenues. Passenger vehicles currently generate $14–15 billion in GST annually, while the two-wheeler segment contributes roughly $5 billion, according to HSBC Global Investment Research.

Nikhil Dhaka, Vice President at Primus Partners, noted, “A GST cut from 28% to 18% on cars and two-wheelers could be the single biggest festive booster for the auto sector in years. For mass-market buyers, an entry-level hatchback or compact sedan could become cheaper by Rs 40,000–60,000, while a mid-size SUV like the Hyundai Creta could see savings upwards of Rs 1.5 lakh. The larger story is about unlocking pent-up demand at the bottom and middle of the pyramid, which in turn supports volumes, localisation, and jobs across the automotive value chain.”

Automakers Likely to Benefit
Maruti Suzuki is expected to be the primary beneficiary, given its dominance in the small-car segment with models such as Alto K10, Celerio, WagonR, Swift, Baleno, and Dzire. Hyundai Motor India and Tata Motors could also see significant gains due to their strong line-up of sub-4 metre cars and compact SUVs.

In the two-wheeler segment, industry leaders such as Hero MotoCorp, Honda Motorcycle & Scooter India, TVS Motor Company, and Bajaj Auto are likely to benefit, thanks to their extensive commuter-focused portfolios.

Read More - New GST Slabs Likely by Sept 22 Ahead of Navratri: Sources

Current GST Rates
Currently, GST rates vary widely by vehicle type. Electric vehicles attract a 5% rate, while two-wheelers up to 350cc and small cars are taxed at 28% plus cess. Larger cars and SUVs face heavier levies, with total taxes ranging between 45% and 50%. The proposed simplification to 5% and 18% is expected to make vehicles more affordable for the majority of buyers.