GST 2.0: How India’s New Tax Rules Will Change Car/Bike Prices (22 Sept 2025)

For countless households in India, buying a car has always been a dream, but taxes made such vehicles expensive. With GST 2.0 now in effect from 22nd September, 2025, the government has changed the way taxes are  charged on vehicle purchases. The anticipated outcome is cars will become less expensive, the tax structure will be simplified, and the auto industry will benefit.

Now let’s look at how GST 2.0 has affected small cars, luxury cars, two-wheelers, EVs, and even your workshop bills.

What Is GST 2.0, and Why Does It Matter?

The prior system was already taxing cars with 28% GST + a cess that was around 22% based on engine size and type (which made the final prices of a car expensive and immensely complex). 

GST 2.0:

• That cess is gone.
• Three slabs are brought in: 5%, 18%, and 40%.
• Vehicle prices are anticipated to come down in all categories.

This move is seen as an attempt to stimulate demand in the auto sector, especially after a slowdown in recent years.

Small Cars – The Biggest Winners

If you’re eyeing an entry-level hatchback or compact SUV, GST 2.0 brings you the biggest savings.

• Old Rate: 29–31%
  
• New Rate: 18%
  
• Savings: ₹50,000–₹80,000 depending on the model

Examples:

Car Model	Old Price (Approx.)	New Price (Approx.)	Savings
Maruti Swift	₹6.5 lakh	₹5.9 lakh	₹60,000
Hyundai i20	₹8.5 lakh	₹7.7 lakh	₹80,000
Tata Punch	₹7.2 lakh	₹6.6 lakh	₹60,000

This is a huge relief for middle-class families and first-time car buyers.

Mid-Size & Luxury Cars

Luxury cars previously attracted a tax of almost 50% (28% GST + 22% cess), making them nearly double the ex-showroom price.

With GST 2.0:

• A flat 40% GST now applies.
• Luxury sedans and SUVs such as the Toyota Fortuner, Hyundai Tucson, BMW X1, Mercedes GLA, Audi Q3, etc., will now be cheaper by ₹2-6 lakhs based on the model.

This not only benefits premium buyers but may also prompt luxury car brands to launch more models in India.

Two-Wheelers – Affordable Again

Bikes and scooters are the lifeblood of Indian roads, and they just got cheaper: 

• Old Rate: 28%
• New Rate: 18% (for bikes under 350 cc)
• Savings: ₹7,000–₹15,000

Example: 

• Royal Enfield Classic 350 – Now ₹14,000 cheaper 
• Bajaj Pulsar 150 – About ₹7,500 cheaper 

High-end superbikes (above 350cc) will still probably be taxed at a higher tax rate, but the entry- and mid-level segments get the most benefit.

Commercial Vehicles – Boost for Transport

• Trucks, buses, ambulances, and three-wheelers: now you get 18% GST.
• This will bring lowered operational costs for transporters and logistics organizations. 
• Over time this may even reduce freight charges, helping businesses and consumers.

Electric Vehicles (EVs) – Still at 5%

The government continues to promote green mobility by keeping EVs at a concessional rate of 5% GST.

Advantage:

• EVs are still cheaper than petrol or diesel cars.
• Now with state subsidies and toll exemptions (for instance, in Maharashtra), the time is right for mass EV adoption.

Popular EVs like the Tata Nexon EV, MG ZS EV, and Mahindra XUV400 will continue in their segment (without tax increase) and remain competitive in their segment, as they have no tax hike.

Also Check: India to Export Electric Vehicles to 100 Countries: A Landmark Move Towards Global Leadership

Car Servicing, Repairs & Spare Parts

And yet another hidden benefit of GST 2.0 is the reduction in the auto components tax rate:

• Previous rate: 28%
• New rate: 18%

This will mean:

• Cheaper spare parts (tires, batteries, brake pads, etc.)
• Smaller workshop service bills
• Lower car maintenance expenses in the long term

Why This Matters for Car Buyers

1. More Affordable Cars: With the cheap purchases now available, even first-time buyers will be considering their options to swap two wheels for four.
2. Simpler Pricing:  No more cess; no more complicated prices; it is now flat pricing, so on-road prices are easily calculated.
3. Boost for Auto Industry: An increase in demand will help manufacturers and dealers and create jobs.
4. Festive Season Advantage: There are a number of festivals coming up Navratri and Diwali, and that is expected to trigger a fresh wave of bookings at car dealerships.

Conclusion 

GST 2.0 will be revolutionary for Indian car buyers. From entry level hatchbacks like the Maruti Swift to  high end premium SUVs like the BMW X1, all segments have the price advantage. Additionally, the government has balanced affordability with sustainability, with EVs still only paying GST from 5% – great news for many!

If you are a consumer who has been waiting to buy a car, the festival season may be the time to book your own vehicle!