The central government is working on major tax reforms under the new GST structure, and this could bring a smile to the faces of car and bike buyers across the country. Announced by Prime Minister Modi on Independence Day, the proposal is expected to be rolled out by Diwali. The key objective behind this move is to simplify taxation while reducing the financial burden on everyday consumers.
Lower Taxes on Small Cars
At present, small cars with engines up to 1.2 liters and less than 4 meters in length attract 28% GST plus an additional 1–3% Cess. This is one of the main reasons why popular hatchbacks and sedans such as Maruti Alto K10, WagonR, Swift, Baleno, Dzire, Tata Tiago, Tigor, Punch, Hyundai i10, i20 and Exter are priced higher. With the new reforms, these vehicles may soon fall under the 18% GST slab, making them significantly more affordable for middle‑class families and first‑time buyers.
Interestingly, even mid‑size cars and compact SUVs—currently taxed at about 43% (GST plus Cess)—are expected to see a cut. Reports suggest they might be brought down to around 40%, leading to a noticeable price drop in models like Maruti Brezza, Tata Nexon, Kia Seltos, Hyundai Creta and Sonet. Although the reduction won’t be as steep as that for small cars, it still offers some relief to SUV buyers.
Motorbikes to Become Budget Friendly
The reform is not limited to cars—two‑wheeler buyers will also gain. Currently, motorcycles up to 350cc are taxed at 28% GST. Under the new structure, this could be reduced to 18%, making commuter favorites like Hero Splendor, Honda Shine, Bajaj Pulsar and TVS Raider much cheaper.
On the other hand, high‑end motorcycles with larger engines, such as the Royal Enfield 650cc, KTM range and Harley Davidson models, are expected to remain under higher tax slabs, keeping them premium products.
Why These Changes Matter
India’s automobile market is heavily dominated by small cars and commuter bikes, as most buyers fall in the budget‑friendly category. A reduction in GST will not only bring direct benefits to consumers but also give a strong push to the entire automobile industry. With demand likely to rise, manufacturers and dealers may see a significant boost in sales, creating a win‑win situation for both buyers and the market.
