GST Council Cuts Rates on Small Cars and Auto Parts to 18%: Hyundai India MD Unsoo Kim welcomes Move

The 56th meeting of the Goods and Services Tax (GST) Council was held on 3rd September 2025 at Sushma Swaraj Bhavan in New Delhi under the aegis of Union Finance Minister Nirmala Sitharaman.

The council has redrawn the indirect tax structure for India’s auto market. The Council cut GST to 18% for mass-mobility segments and standardized every automobile component at a uniform 18%, while moving premium categories to a higher 40% category. The changes for goods take effect from 22 September 2025.

For passenger vehicles, small cars drop from 28% to 18%. In policy terms this covers petrol, CNG or LPG engines up to 1200 cc and diesel up to 1500 cc in the sub-four-metre class.

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Commercial mobility also benefits, with buses, trucks and ambulances reduced to 18%. A major simplification arrives in the aftermarket: all auto parts now attract a flat 18%, replacing the earlier 12/18/28% mix that created classification disputes and price distortion. Electric vehicles continue at 5%, preserving the incentive for clean mobility. Mid-size and large cars and motorcycles above 350 cc move to the 40% slab, replacing today’s 28% plus cess framework with a single high rate aimed at luxury and de-merit categories.

Hyundai Motor India Managing Director Unsoo Kim welcomed the overhaul in an official statement dated 4 September 2025, calling the reforms a strong impetus for the economy and consumer confidence.

He said the measures align with the government’s Viksit Bharat and Make in India agenda by boosting domestic manufacturing and demand across urban and rural markets. Kim quantified the impact on Hyundai’s internal-combustion portfolio, stating that “60% of our ICE portfolio will now fall under the 18% slab rate, with the remainder at 40%”.