GST Cut Makes Small Cars and Bikes Cheaper from September 22

Buyers of Small Cars May Save Up to Rs. 30,000 and Bikes Up to Rs. 8,000 as GST Cut Reduces Ex-Showroom Prices by 12%

The government has given relief to buyers of small cars and bikes by cutting GST rates, a move that will make vehicles more affordable for millions of families. The new tax rates will come into effect from September 22, 2025, and are expected to give a strong push to the automobile industry, especially during the upcoming festive season.

Big Relief for Small Car and Bike Buyers

Small cars and motorcycles under 350cc benefit from a sharp 10 percentage-point cut. They move into a flatter 18% tax slab, replacing the old 28% bracket. This change brings immediate relief to the auto sector.

The GST Council, which decides tax rates, has announced that small petrol and diesel cars will now attract 5% less GST than before. Similarly, two-wheelers with engine capacity up to 350cc will get a 3% tax cut. Popular commuter cars and motorcycles will thus be cheaper for the middle class, who can better afford the prices.

Industry experts speculate that this change may generate fresh demand as it was declining due to built-in rising costs coupled with higher interest rates. Vehicle manufacturers had maintained for the tax relief to somehow revive sales, which is looked upon as a timely move now. Makers of cars and bikes expect a huge number of bookings to hit their portals amidst the festive period of Navratri and Diwali with lower prices, as during this time, many families plan major purchases.

For buyers, the benefit is direct. A small car that earlier cost around Rs. 6 lakh could now become cheaper by nearly Rs. 25,000 to Rs. 30,000, depending on the model and state. Similarly, popular commuter bikes in the 125cc to 350cc range may become cheaper by Rs. 5,000 to Rs. 8,000. This price drop could encourage more first-time buyers to go ahead with their purchase.

The cut could reduce ex-showroom prices by as much as 12%, giving budget buyers a real reason to consider new purchases during the upcoming festive season. Automakers expect revived demand in the small-car and commuter bike segments, especially after weeks of sluggish sales.

Luxury Vehicles in Higher Tax Slab

Not every vehicle enjoys this relief. Larger motorcycles above 350cc and cars exceeding four metres, or with engines above 1200cc (petrol) or 1500cc (diesel), now fall under a unified 40% slab. Luxury cars, SUVs, cruisers, yachts, and sin goods join this higher category.

Some premium vehicle owners may still benefit. The previous structure included steep cesses on top of GST, often pushing total tax to nearly 50%. The new 40% slab, with cess eliminated, may reduce the burden slightly for some buyers.

Electric vehicles remain regally favored with a steady 5% GST rate.

This GST rationalisation is part of a broader strategy to simplify tax slabs and promote domestic consumption. Earlier the four slabs were at 5%, 12%, 18%, and 28%; now there are only three, namely, 5%, 18%, and 40% for luxury/sin goods. Industry players have welcomed the move for the clarity it brings and the expected jump in affordable vehicle sales but are cautious that subsidy structures linked to GST would need revisiting.

I think the other thing which will generate a lot of employment for the automobile industry is the product being made and higher demand. Dealers are hopeful that footfall will grow in showrooms after 22nd September.

But experts also caution that while the good news may tax cut, factors like fuel price and interest on loans will still weigh on the buyers' decisions. But overall, this tax relief is welcomed as a positive step.

In simple terms, the government’s decision means cheaper small cars, cheaper bikes, and fresh energy for the automobile industry. For families waiting to buy their dream car or a new bike, the timing could not have been better.