New GST Reform; Small Cars To Get Cheaper, Big Bikes To Get More Expensive!

The moment of truth has finally arrived, as the Government of India has re-jigged the GST rates for various categories of cars, two-wheelers, and even commercial vehicles. For the sake of this story, however, we shall focus mainly on cars and two-wheelers. If you remember our previous story on GST rates, many likelihoods from it have turned out to be true.

The new GST rates are going to impact buyers decisions, but before we dive deeper, make sure to join the 91wheels WhatsApp Community to keep up with the latest news and automotive updates.

Also read: Vintage Vehicle Registration Now Open In Uttar Pradesh!

New GST Reform; Small Cars

Let's begin with the good bits first. According to the new GST reforms, the tax rate for small cars has been reduced, from the earlier 28 percent to 18 percent. Any car that measures less than 4 metres in length, and comes with an engine capacity of less than 1200cc (petrol) and 1500cc (diesel). This move is highly likely to benefit the compact SUV segment, with prime examples being the Mahindra XUV 3XO, Tata Nexon, Skoda Kylaq, Maruti Suzuki Fronx, and the Kia Sonet, to name a few. Interestingly, even the Mahindra Thar RWD Diesel will also benefit from this, as it measures upto 3985mm in length, and it is powered by a 1.5-litre diesel engine.

To help things further, let's take a Mahindra XUV 3XO, which is a sub-4m compact SUV, available with the choice of a 1.2-litre turbo-petrol engine and a 1.5-litre diesel engine. While its current on-road price ranges between Rs 9.08 lakh to Rs 18.42 lakh (Delhi), the reduced tax rate means that these prices will come down significantly. The on-road price, which also includes your registration and road tax, is calculated on the basis of your car's ex-showroom price. The ex-showroom price of the base variant, the MX1 Petrol is Rs 7.99 lakh. With the new reduced GST rates, the ex-showroom price tag of the XUV 3XO should also come down significantly. Here is a quick look at the indicative difference of pricing;

New GST Reform; Hatchback Segment

There is also a case to be made here for the small car segment, which consists of the Maruti Suzuki Alto K10, Celerio, WagonR, Swift, Renault Kwid, Tata Tiago, and the Hyundai Grand i10 Nios, has shrunk over the last few years due to the increasing prices. In July 2025, only the WagonR and Swift made it to the top five selling cars from the small hatchback segment. With the reduced tax rates, we could possibly see a resurgence of sorts for the small car segment.

Also read: Is The Small Car Truly Disappearing From The Indian Market?

New GST Reform; Mid-Size Cars And Premium Segment

Now, the confusing thing here must have been the 40 percent tax slab for mid-size segment cars and premium vehicles. Vehicles larger than 4 metres in length and bearing engines larger than 1200cc (petrol), 1500cc (diesel) used to attract about 45-50 percent GST, out of which 17-22 percent was the cess levied. Under the new regime, the revised tax rate is now at a flat 40 percent with the cess rate now gone. This means that cars such as the Hyundai Creta, Mahindra XUV700, and even premium cars such as BMW 5 Series, Mercedes-Benz E-Class, the Audi Q7 and so on will also get just a tad bit more affordable. Interestingly, however, the Maruti Suzuki Brezza also faces this same issue despite being a sub-4m car, as it is powered by a larger 1.5-litre petrol engine.

New GST Reform; Hybrid And EVs?

There are no changes to the tax rate of EVs, and they will continue to be taxed at 5 percent. This is a move that is being welcomed by many EV manufacturers, both cars and two-wheelers, legacy manufacturers and startups alike. Hybrid cars, however, will continue to be taxed at the same rates as their petrol and diesel counterparts.

What About Two-Wheelers?

Moving over to two-wheelers. The tax rates for two-wheelers 350cc and lesser have also been reduced from 28 percent to 18 percent. This will impact brands such as TVS, Honda, Yamaha, Hero, Bajaj, and to some extent Royal Enfield. Some popular two-wheelers, such as the Honda Activa, TVS Jupiter, Hero Splendor, TVS Apache RTR 200 4V, Yamaha R15, and the Royal Enfield 350 lineup will likely see a noticeable reduction in prices.

New GST Reform; Not-So-Good News

This is where have things taken a slight hit. Two-wheelers above powered by engines larger than 350cc in capacity will now attract a higher tax rate of 40 percent, which will make motorcycles above 350cc even more costlier than before. This is certainly going to dent the dreams of a lot of buyers, especially those who have been wanting to enter the world of premium motorcycling for a long time. Brands such as Triumph, KTM, Ducati and so on will face the heat, and even Royal Enfield, whose 650 lineup has been quite successful, will also get impacted.