GST Rate Cuts on Automobiles & Transport: What’s Cheaper Now and Why It Matters
What’s Changing & Why It Matters
The revised GST structure cuts taxes across bikes (up to 350cc), small cars, large cars, buses,
tractors, commercial vehicles, and most auto components. Lower taxes are expected to reduce
on-road prices, revive demand, and support over 3.5 crore jobs directly and indirectly—
from manufacturing and sales to finance, logistics, and after-sales services.
| Segment | New GST | Earlier Rate | Quick Impact |
|---|---|---|---|
| Two-wheelers (≤ 350cc) | 18% | 28% | Cheaper bikes; boosts rural & gig mobility |
| Small cars (≤ 4m; <1200cc petrol / <1500cc diesel) | 18% | 28% | Entry-level cars more affordable; first-time buyers |
| Large cars | 40% flat (no cess) | 28% + cess | Simpler tax; ITC fully usable; effective price relief |
| Tractors (< 1800cc) | 5% | 12% | Cheaper farm mechanisation; productivity boost |
| Road tractors for semi-trailers (> 1800cc) | 18% | 28% | Logistics fleet expansion & modernization |
| Tractor parts | 5% | 12% | Lower maintenance costs; MSME boost |
| Buses (≥ 10 seats) | 18% | 28% | Cheaper fleets; public transport push |
| Commercial goods vehicles | 18% | 28% | Lower freight; inflation relief; export competitiveness |
| Third-party insurance of goods carriage | 5% with ITC | 12% | Operating cost relief for transporters |
| Auto components (majority) | 18% | 28% | Cost relief across the value chain |
| Road transport services (goods & passengers) | Option: 5% or 18% | — | Choice based on business model; avoids cascading |
Detailed Impacts Across Segments
Two-wheelers: Cheaper bikes for rural, semi-urban, and gig workers; better access through lower EMIs.
Small cars: Affordable mobility for middle-class families and first-time buyers; dealership and finance growth.
Large cars: Simplified tax at 40% with full ITC; premium segment affordability improves.
Tractors: Affordable mechanisation, crop productivity gains, and boost to ancillary MSMEs.
Buses: Reduced costs for corporates, schools, state transport; cheaper public transport fares.
Trucks: Cheaper ownership lowers freight costs; benefits agriculture, FMCG, e-commerce, and exports.
Auto parts: Reduced to 18%, benefiting MSMEs across the supply chain.
Transport services: Businesses can choose between 5% or 18% GST, increasing flexibility and ITC benefits.
Macro Impact
- Demand revival across vehicles and parts; employment boost in dealerships, logistics, and MSMEs.
- Credit growth support for banks, NBFCs, and fintech lenders via higher retail auto loans.
- Supports Make in India, cleaner mobility, and logistics efficiency aligned with PM Gati Shakti.
notifications, tariff schedules, and CBIC circulars for exact applicability, ITC eligibility, and
classification details.
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