New Delhi, September 22, 2025 – The much-awaited Next Gen GST Reforms 2025, announced earlier this month by Finance Minister Nirmala Sitharaman, have officially come into effect from today. The new tax rates bring big relief for buyers of entry-level cars and two-wheelers, while bigger cars and high-capacity bikes will now fall under the costlier luxury goods bracket.
Small Cars and Bikes Become Cheaper
Under the new GST structure, vehicles and motorcycles with engines up to 350cc will now be taxed at 18% GST, instead of the earlier 28%. This move will significantly reduce prices of small cars, hatchbacks and commuter motorcycles.
- Cars with petrol engines up to 1200cc or diesel engines up to 1500cc, and length of up to 4000 mm, will now fall in the 18% bracket.
- Popular models like Maruti Alto, Hyundai i10 and entry-level SUVs will become more affordable.
- Two-wheelers above 350cc and bigger premium cars will now attract 40% GST, placing them in the luxury/sin goods category.
- Electric vehicles (EVs) remain unchanged at 5% GST, making them one of the most affordable segments.
Bigger Cars Shift to 40% GST
Cars that do not meet the “small car” definition are now classified under the 40% GST slab. Earlier, these cars attracted 28% GST plus an additional cess of up to 22%, nearly 50% in total. The new 40% flat tax rate is a simplification, though premium cars will continue to remain expensive.
Price Cuts Announced by Car Companies
Soon after the new GST rates were announced, leading carmakers including Tata Motors, Mahindra, Maruti Suzuki, Renault and Jeep slashed prices to pass on the benefits to customers.
Tata Motors
- Announced price cuts of up to ₹1.55 lakh.
- Tiago saw a reduction of up to ₹75,000, while Tigor became cheaper by up to ₹80,000.
- Other models like Altroz, Punch, Nexon, Curvv, Harrier and Safari also received significant cuts.
Mahindra
- SUVs such as Bolero, Bolero Neo, XUV 3XO and Thar 2WD (Diesel) now fall under the 18% bracket.
- Other larger SUVs will attract 40% GST.
Maruti Suzuki
- Entry-level Alto K10 is now priced at ₹3,69,900 after a price cut of ₹1,07,600.
- The popular Grand Vitara also saw a price reduction of ₹1,07,600, with a new price of ₹10,76,500.
Renault
- Announced reductions of up to ₹96,395.
- Kiger price dropped from ₹11,29,995 to ₹10,33,600.
- Kwid Climber now priced at ₹6,44,995, down from ₹5,90,000.
Jeep India
- Passed on heavy GST benefits, with reductions of up to ₹4.84 lakh.
- Jeep Compass now priced at ₹17.73 lakh (down from ₹18.99 lakh).
- Jeep Meridian cut from ₹24.99 lakh to ₹23.33 lakh.
Also Read: GST Reforms 2025: AC, TV, Fridge हुए सस्ते, लेकिन Sin Goods और IPL Tickets पर बढ़ा टैक्स
Key Takeaways
- 18% GST for small cars and bikes up to 350cc.
- 40% GST for bigger cars, luxury SUVs and high-capacity bikes.
- 5% GST continues for electric vehicles, keeping them budget-friendly.\
- Major car brands like Mahindra, Maruti, Tata, Renault and Jeep have already slashed prices to benefit customers.
With these GST reforms, entry-level cars and commuter bikes have become more affordable for the middle class, while luxury cars and premium bikes remain on the expensive side.
