THE SAVINGS DRIVER

New GST rules slash auto taxes to 18 per cent and 40 per cent, keep EVs at 5 per cent, boosting affordability, clarity, and festive-season savings

- By UTKARSH AGARWAL

THIS FESTIVE season buying cars, bikes, or even trucks will become lighter on the pocket as the GST Council, chaired by Finance Minister Nirmala Sitharaman in its 56th meeting, unveiled a new tax structure for the automobile sector.

The complex cess system has been scrapped, with vehicles now classified under two GST slabs: 18 per cent and 40 per cent, while electric vehicles continuing to enjoy a concessional 5 per cent rate.

Coming into effect from September 22, 2025, the move promises affordable pricing for buyers, reduced compliance for automakers, and a healthier demand throughout the festive season and beyond.

Small Cars, Big Relief

One of the most significant changes is for the four-wheeler market, where small and entry-level cars up to 1200cc for petrol, 1500cc for diesel, and under four meters in length, will now attract 18 per cent GST, down from the previous 28 per cent plus cess. That's the biggest relief for first-time buyers and families aspiring to own their first car.

Industry leaders have hailed the move as a turning point. Anish Shah, CEO & MD of Mahindra Group, said “The correction of long-pending inverted duty structures in critical industries is welcome. They simplify compliance, expand affordability, and energise consumption, while enabling industry to invest with greater confidence.”