New Delhi: The GST Council-headed by Union Finance Minister Nirmala Sitharaman in its 56th meeting on 3rd September, 2025 made the recommendations relating to changes in GST tax rates. In this article, we inform you about the new GST rates and slabs that will have a wide-scale impact on the many items related to Heavy industries.
- Two-Wheelers (Bikes upto 350cc which incudes bikes of 350cc) – (28% to 18%)
- Small Cars (GST down to 18%, from 28%)
- Large Cars (GST reduced to flat 40% with no cess)
- Tractors (<1800 cc down from 12% to 5%)
- Road tractors for semi-trailers (engine capacity more than 1800 cc down from 28% to 18%)
- Tractor parts reduced to 5%
- Buses (seating capacity of 10+ persons) [GST down from 28% to 18%]
- Commercial Goods Vehicles (Trucks, delivery-vans, etc) [GST down from 28% to 18%]
Impact of GST Rate Cuts on the Auto Sector and MSMEs
Automobile sector: The GST rate cuts have been set across different categories. It includes bikes (upto 350 cc which includes bikes of 350cc), buses, small cars, medium and luxury cars, tractors (<1800cc), etc.
The GST Council also recommended reduction of rates on auto parts.
The Ministry of Heavy Industries is of the view that the reduction of GST rates will help demand increase, which would help automobile manufacturers and the large ancillary industry (tyres, batteries, components, glass, steel, plastics, electronics, etc).
The ministry is expecting a rise in sales of vehicles due to lower taxes, which would eventually help the MSMEs, as increased sales means there would be a demand for the auto components.
The new GST rates will help create more employment opportunities in dealerships, transport services, logistics, and component MSMEs. The auto industry directly and indirectly supports over 3.5 crore jobs.
The people engaged in jobs of drivers, mechanics, small service garages will also benefit as their demand will also increase
The NBFCs, banks, fintech lenders are also set to benefit with teh new GST rate structure as a revival in auto sales will support retail loan growth.
The rationalisation of GST rates would encourage fresh investments in the automobile sector.
The ministry is also hoping that people would opt for replacing old vehicles with new, fuel-efficient models.
