Indian government has announced GST 2.0
The Indian government has announced GST 2.0, a major tax change that will make small cars and bikes cheaper, keep electric vehicles (EVs) at their low tax rate, and increase taxes on big hybrids and premium vehicles. The new rates start 22 September 2025, just in time for the festive season.
What’s Changing
- Small petrol, CNG, LPG cars (≤1200cc, ≤4m) – GST cut from 28% to 18%.
- Small diesel cars (≤1500cc, ≤4m) – GST cut from 28% to 18%.
- Bikes and scooters up to 350cc – GST cut from 28% to 18%.
- Electric vehicles – GST stays at 5% (no change).
- Small hybrids (within small‑car limits) – GST cut to 18%.
- Large hybrids – GST jumps to 40%.
- Luxury cars, SUVs, sports cars, and bikes over 350cc – GST set at 40% (slightly lower than old peak rates).
- Auto parts – GST cut from 28% to 18%, making repairs cheaper.
Before & After Price Examples
Top‑Selling Cars
| Model | Old Price | New Price* | Change |
| Maruti Alto K10 | ₹5.00 lakh | ₹4.70 lakh | –₹30,000 |
| Maruti Swift | ₹7.00 lakh | ₹6.55 lakh | –₹45,000 |
| Hyundai Grand i10 Nios | ₹6.50 lakh | ₹6.10 lakh | –₹40,000 |
| Tata Punch | ₹6.50 lakh | ₹6.10 lakh | –₹40,000 |
| Tata Tiago EV | ₹8.70 lakh | ₹8.70 lakh | No change |
| Toyota Innova HyCross Hybrid | ₹25.00 lakh | ₹27.50 lakh | +₹2.5 lakh |
| Mahindra XUV700 | ₹20.00 lakh | ₹18.80 lakh | –₹1.2 lakh |
Top‑Selling Bikes & Scooters
| Model | Old Price | New Price* | Change |
| Honda Activa 125 | ₹90,000 | ₹82,000 | –₹8,000 |
| Hero Splendor Plus | ₹75,000 | ₹68,500 | –₹6,500 |
| Bajaj Pulsar 150 | ₹1.20 lakh | ₹1.09 lakh | –₹11,000 |
| Royal Enfield Classic 350 | ₹2.00 lakh | ₹2.25 lakh | +₹25,000 |
| Ola S1 Pro (EV) | ₹1.30 lakh | ₹1.30 lakh | No change |
\*Prices are estimates based on ex-showroom Delhi; actuals may vary by state and variant.
What This Means for You
- Buying a small car or commuter bike? You’ll save money.
- Buying an EV? No change – still the lowest tax rate.
- Buying a large hybrid or big bike? Expect to pay more.
- Need repairs? Parts will be cheaper, so maintenance costs should drop.
The Bigger Picture
This is the biggest tax reset for the auto sector since GST began in 2017. The government is clearly:
- Making mass‑market mobility more affordable.
- Keeping EVs attractive.
- Discouraging large hybrids in favour of direct EV adoption.
- Simplifying the tax structure to 5%, 18%, and 40%.
For buyers, this festive season could be the best time in years to upgrade your ride. For AutoVolte readers, this isn’t just about price tags; it’s about understanding how policy shapes the vehicles we choose, the technologies we adopt, and the roads we travel. What’s your take on GST 2.0? Drop your thoughts in the comments. Thanks!
Go To: Homepage
GST Updates: https://www.gst.gov.in/
FAQ’s:
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What are the new GST slabs under GST 2.0 for vehicles?
GST 2.0 keeps the base GST rate at 28% for most vehicles, but the compensation cess varies by segment. EVs, small bikes, and entry-level cars may see lower cess rates, while luxury cars, hybrids, and SUVs could face higher slabs.
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Which vehicle segments are likely to benefit from GST 2.0?
Electric vehicles (EVs) and bikes under 150cc may get price cuts due to reduced cess and better input credit flow. Budget hatchbacks and commuter bikes could also stay stable or drop slightly.
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Will luxury cars and hybrids become more expensive?
Yes. Vehicles with engine capacity above 1500cc, length over 4 meters, or hybrid powertrains may attract higher cess—up to 22%, depending on configuration. This could push prices up post-September.
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Are there any changes for commercial vehicles?
Light commercial vehicles (LCVs) and goods carriers may see minor adjustments, but buses and fleet EVs could benefit from lower effective tax rates under green mobility incentives.
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How does GST 2.0 affect input tax credit for manufacturers and dealers?
GST 2.0 tightens input credit claims. Only fully matched invoices will qualify, which may impact dealer margins and backend pricing strategies—especially for multi-brand showrooms and importers.