GST Council Meet Reduces GST Rates to 18 % on Motor Vehicle meant to Carry 10 or More Persons: Know More
These adjustments represent a major step toward a more straightforward and efficient GST system, which will benefit average customers and increase consumption.
Motor - vehicle - gst - Taxscan
Motor - vehicle - gst - Taxscan
A substantial tax reform for the automotive industry was introduced at the 56th GST Council meeting, which included a large drop in the GST rate for cars built to accommodate 10 or more passengers. A GST rate of 18% will be applied to all motor vehicles registered under HSN 8702 that are intended to carry ten or more people, including the driver. It was lowered from 28%.
What is the Impact of the Rate Cut?
The expected drop in the GST rate will benefit public transportation providers, educational institutions, and commercial companies who use these vehicles for staff mobility by lowering the cost of these vehicles. Increasing demand in the commercial vehicle market, a significant economic sector, is the aim of this initiative. A lower tax burden could encourage fleet expansion and modernization.
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In the end, lower operating costs for operators might result in lower passenger tickets, particularly for bus travel. The GST rate reduction on specific autos is part of a more extensive reform proposal that was announced by the GST Council. By switching to a two-slab system of 5% and 18%, the new regime, which takes effect on September 22, 2025, seeks to simplify the tax structure.
The GST rate has been lowered to 18% for small diesel vehicles up to 1500cc and up to 4000mm in length, as well as small gasoline, LPG, and CNG cars up to 1200cc and up to 4000mm in length. Luxury automobiles, which are defined as cars with an engine size greater than 1500cc or a length longer than 4000mm, are subject to a special 40% tax. SUVs are no exception.
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Instead of paying 28% GST, motorcycles with engines up to 350cc now only pay 18%. However, a higher rate of 40% will apply to motorcycles with engines larger than 350cc. The tax structure for manufacturers has been made simpler by the GST's consistency at 18% on all vehicle parts.
These adjustments represent a major step toward a more straightforward and efficient GST system, which will benefit average customers and increase consumption.
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