The upcoming GST Council meeting is poised to bring sweeping changes to India’s automotive sector, potentially altering how cars and motorcycles are priced in the world’s third-largest auto market. Finance Minister Nirmala Sitharaman is expected to steer a major rationalisation of GST rates, reducing the existing four slabs at 5%, 12%, 18% and 28%, to just two, at 5% and 18%.
For the industry, this shift could mean a sharp 10 percentage point cut in GST for cars and two-wheelers currently taxed at 28%. Small petrol cars with engine sizes up to 1,200 cc, for instance, may now attract 18% GST instead of the current 28%.
GST for EVs:
Electric vehicles, however, face a mixed bag. According to reports, the Council may raise GST on ₹20–40 lakh EVs to 18% from the current 5%, while luxury EVs could face an even steeper tax hike.
The decision would be a setback for Tesla and BYD, both of whom have struggled to make significant inroads into the Indian market. Tesla, for instance, has received just 600 bookings so far, and plans to ship only 350–500 cars from its Shanghai plant this year, far below its initial target of 2,500 units.
GST for Motorcycles:
Motorcycles too are under the scanner. The industry has long demanded a GST reduction to 18% from 28%, which could provide much-needed relief for market leaders Hero MotoCorp and Honda. However, a 40% tax on bikes above 350 cc is also being considered, a proposal strongly opposed by Bajaj Auto and Royal Enfield, whose mid-capacity motorcycles are critical to India’s global footprint.
While GST cut can lead to reduce government revenues, analysts are estimating annual losses of ₹25,000–30,000 crore for cars and ₹18,000–20,000 crore for two-wheelers, with a hope of higher sales due to lower price.
