The Goods and Services Tax (GST) system in India has gone through one of its biggest overhauls in September 2025. The GST Council has introduced a two-slab structure (5% and 18%), along with a new 40% slab for luxury and sin goods. These reforms, effective from September 22, 2025, are designed to simplify the tax system, reduce confusion, and bring relief to the middle class.
For the automobile sector—which contributes about 7% to India’s GDP and employs millions—this is a game-changing development. The new rules directly affect car prices after new GST reform and bike prices after new GST reforms, making some vehicles cheaper while pushing others slightly higher in cost.
In this article, let’s break down the new GST impact on bikes and the new GST impact on cars in simple terms.
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Overview of the New GST Reforms
- Old System: Cars and bikes attracted 28% GST, plus an additional cess of 1–22% depending on vehicle type.
- New System: Compensation cess has been removed. Vehicles now fall under either 18% or 40%, depending on category.
- Objective: Make entry-level vehicles affordable, simplify taxation, and boost demand in mass-market segments while taxing luxury products higher.
This means mass-market cars and bikes will get cheaper, but premium bikes and larger cars/SUVs may see a price hike or minor adjustment.
Also read: Royal Enfield Bike Price After New GST – Full List of Updated Prices 2025
New GST Changes and Impact on Bikes (Two-Wheelers)
India is the world’s largest two-wheeler market, with more than 20 million bikes sold annually. Entry-level commuter bikes dominate sales, while premium and luxury motorcycles form a niche segment.
Old vs New GST Rates for Bikes
| Category | Old GST Rate | New GST Rate (from Sep 22, 2025) | Approx. Price Impact |
|---|---|---|---|
| Bikes up to 350cc (e.g., Hero Splendor, Honda Shine, Bajaj Pulsar, Royal Enfield Classic 350) | 28% | 18% | Price cut of 5–8% |
| Bikes above 350cc (e.g., Royal Enfield Himalayan 450, KTM Duke 390, Harley-Davidson X440, Triumph Speed 400) | 28% | 40% | Price hike of 7–10% |
| Electric Bikes (EVs) | 5% | 5% | No change |
What This Means:
- For Consumers:
- Entry-level bikes get cheaper by ₹3,000–₹10,000, a big plus for rural and urban commuters.
- Premium bikes above 350cc will become more expensive—buyers may pay ₹14,000–₹20,000 extra for a bike priced around ₹2 lakh.
- Electric bikes remain unaffected, keeping them attractive under India’s green mobility push.
- For Manufacturers:
- Companies like Hero, Bajaj, TVS, Honda will benefit most due to higher demand for commuter bikes.
- Premium-focused brands like Royal Enfield, KTM, Harley, Triumph may face slower sales or may need to absorb part of the tax impact.
- Economic Impact:
- Entry-level demand is expected to rise by 10–15%, supporting rural mobility.
- Premium bike sales could dip by 5–10%, slightly affecting luxury imports.
Also read: Top 10 Best Mileage Bikes in India Under ₹1.5 Lakh
New GST Changes and Impact on Cars
India sold about 4.2 million cars in FY 2024–25, with small cars being the backbone of sales. The new GST reforms focus on reducing the cost of small and mass-market cars, while luxury SUVs and premium hybrids fall under higher taxation.
Old vs New GST Rates for Cars
| Category | Old GST Rate | New GST Rate (from Sep 22, 2025) | Approx. Price Impact |
|---|---|---|---|
| Small Cars (Petrol/CNG <1200cc, Diesel <1500cc, length <4m) | 28% + 1–3% cess (29–31%) | 18% | Price drop of 5–10% |
| Small Hybrids | 28% + 15% cess (43%) | 18% | Big price drop of 15–20% |
| Mid/Large Cars & SUVs | 28% + 15–22% cess (43–50%) | 40% | Price drop of 3–10% |
| Larger Hybrids | 28% + 15% cess (43%) | 40% | Slight drop of 2–3% |
| Electric Cars (EVs) | 5% | 5% | No change |
| Commercial Vehicles (buses, trucks, ambulances) | 28% | 18% | Price drop of 5–8% |
What This Means:
- For Consumers:
- Small car buyers gain the most—models like Swift, i10, Punch, and Kwid may get cheaper by ₹20,000–₹50,000.
- Larger SUVs like Creta, Seltos, and Fortuner will also see ₹45,000–₹1.5 lakh reductions, making them slightly more attractive.
- Small hybrids become much more affordable, but larger hybrids don’t get much relief.
- EVs remain at just 5% GST, keeping them the cheapest option for eco-friendly buyers.
- For Manufacturers:
- Mass-market brands (Maruti, Hyundai, Tata, Renault) will benefit the most.
- SUV-heavy brands (Mahindra, Kia, Toyota) gain a small edge but not as much as small-car makers.
- EV makers get continued incentives, ensuring focus on electrification.
- Economic Impact:
- Car sales could rise by 5–10% in FY 2025–26, boosting jobs and industries like steel, tyres, and auto components.
- Logistics costs may fall due to cheaper trucks and commercial vehicles.
- Hybrids, however, may lose ground to EVs due to limited tax benefits.
Also read: Top 5 bike maintenance tips for Monsoon
Conclusion
The new GST reforms bring mixed but mostly positive news for India’s automobile industry.
- Bike price after new GST reforms: Entry-level commuters become cheaper, premium bikes more expensive, EVs unchanged.
- Car price after new GST reform: Small cars and small hybrids see the biggest price drops, SUVs become slightly cheaper, and EVs remain the most incentivized.
Overall, the reforms are expected to:
- Boost affordability for the middle class.
- Encourage rural and semi-urban buyers to upgrade to bikes and small cars.
- Push manufacturers towards EVs for long-term sustainability.
For buyers, this is a great time to invest in an entry-level bike or a small car, while premium bike enthusiasts may have to pay a little extra for their passion.
Watch this full video to understand the new GST impact on Bikes and cars
New GST on bikes and cars FAQ’s
What are the new GST rates for bikes in India?
The new GST rates for bikes in India are 18% for those up to 350cc and 40% for bikes above 350cc, effective from September 22, 2025.
How will GST reforms affect car prices in India?
GST reforms will reduce prices for small cars (now at 18%) by 5-10% and for mid-size/large cars/SUVs (now at 40%) by 3-10%, effective September 22, 2025.
Are electric vehicles affected by the new GST changes?
No, electric vehicles (both bikes and cars) remain unchanged at a 5% GST rate under the new reforms.
Which bike and car models will become cheaper after GST reform?
Entry-level bikes like Hero Splendor and small cars like Maruti Swift will become cheaper, with price drops of 5-10%, while premium models may see price increases.
