The Council, led by Finance Minister Nirmala Sitharaman, is likely to rationalise the current four GST slabs into two 5% and 18%. This move could bring down taxes on small cars and commuter motorcycles, while at the same time making luxury electric cars and big motorcycles more expensive.
Small Cars May Get Cheaper
According to sources, small petrol cars with an engine size of up to 1,200 cc may soon attract only 18% GST instead of the current 28%. This reduction is also expected to apply to small hybrid cars, giving a major boost to companies like Maruti Suzuki and Toyota, which have a strong presence in this segment.
However, this could turn out to be a setback for Tata Motors and Mahindra, who have focused on electric vehicles rather than hybrids.
At the same time, the Council is reportedly considering a GST hike on electric cars priced between ₹20–40 lakh, raising the rate from 5% to 18%. Luxury EVs could face even higher taxes.
This would directly impact global giants like Tesla and BYD, both of whom have already struggled to expand in India. Tesla has received only 600 bookings so far and may ship just 350–500 units from its Shanghai plant this year, compared to its original plan of 2,500 cars.
Two-Wheelers to Get a Big Relief
The two-wheeler industry has long demanded a tax cut, and the Council is likely to bring GST on motorcycles and scooters down from 28% to 18%. This is expected to benefit Hero MotoCorp, Honda Motorcycle & Scooter India, and TVS Motor, especially in the commuter segment.
But there is a catch. Reports suggest that the Council may impose 40% GST on motorcycles above 350 cc, a move that could hurt brands like Royal Enfield and Bajaj Auto, both leaders in the mid-capacity motorcycle segment.
Royal Enfield Chairman Siddhartha Lal has warned that such a move would damage India’s edge in global markets, while Rajiv Bajaj, Chairman of Bajaj Auto, has argued for a uniform GST of 18% across all two-wheelers.
Revenue Impact for Government
Industry bodies SIAM and FADA estimate that:
- The car industry could face an annual revenue loss of ₹25,000–30,000 crore if GST on small cars is cut to 18%.
- For example, a ₹6 lakh car currently taxed at 28% generates ₹1.68 lakh GST. At 18%, this falls to ₹1.08 lakh, a 36% drop per car.
- In the two-wheeler sector, the tax cut could mean a revenue loss of ₹18,000–20,000 crore annually.
- Taxing 350 cc+ bikes at 40% may bring in only ₹1,500–2,000 crore, while higher GST on luxury cars may add ₹5,000–7,000 crore.
Why Cut GST?
Despite the expected revenue loss, the government hopes that lower prices will push up sales volumes, especially during the upcoming festive season when vehicle demand peaks.
Economists believe that a rise in sales could add 20–30 basis points to India’s GDP growth, helping balance out the shortfall in tax revenue.
What It Means for Consumers
- Car buyers could see lower prices for hatchbacks and small hybrids.
- Two-wheeler buyers will benefit from cheaper scooters and commuter bikes.
- Buyers of luxury EVs and big motorcycles may end up paying more.
- Automakers will need to adjust strategies, with hybrid carmakers gaining and pure EV players facing challenges.
Conclusion
The GST Council’s decision could reshape India’s auto industry by making mass-market vehicles more affordable while putting luxury EVs and premium bikes under higher tax slabs. Whether this balance helps both consumers and the government remains to be seen, but one thing is certain these reforms will touch every segment of India’s automotive market.