The government, in a move aimed at stimulating demand in the automobile sector, has restructured GST rates for vehicles and auto parts. The Compensation Cess has been eliminated, making vehicles cheaper in several categories.
Under overhaul, 12 and 18 per cent slabs have been removed, and 5 and 12 per cent slabs remain in place. For luxury and sin goods, a new 40% slab has been rolled out in addition to it.
Overview of GST Slabs
18% Slab
Cars that use petrol, hybrid technology, liquefied natural gas (LNG), and compressed natural gas (CNG).
(Diesel: up to 1,500cc engine and under 4 meters length; Petrol: up to 1,200cc engine and under 4 meters length;)
- Auto parts (other than tractors)
- Tractors (engine capacity above 1,800cc)
- Commercial vehicles for goods transport
- Motorcycles with engine capacity up to 350cc
- Three-wheelers
- Ambulances and buses
- Tyres
40% Slab
- Petrol cars with engine capacity above 1,200cc, diesel cars above 1,500cc, or a length exceeding 4 meters
- High-end cars
- Motorcycles above 350cc
- Racing cars
- Station wagons
5% Slab
- Tanks and other armoured fighting vehicles
- Tractors up to 1,800cc engine capacity
- Tractor parts
- Electric vehicles (EVs)
- Tractor tyres and tubes
- Bicycles and other cycles
List of Beneficiaries
- Auto parts: Endurance, Belrise, Sona BLW, Motherson, Carraro
- Armoured vehicles: Tata Motors, Bharat Forge
- Tractors: Mahindra & Mahindra, Escorts, Kubota
- Two-wheelers (up to 350cc): Hero MotoCorp, Bajaj Auto, TVS, Eicher
- Small cars: Maruti Suzuki, Tata Motors, Hyundai
- Three-wheelers: Bajaj Auto, TVS
- Buses: Tata Motors, Ashok Leyland
- Tyres: Apollo Tyres, MRF, Ceat, Balkrishna Industries
Read Also: Revised GST Slab Rates in India F.Y. 2025-26 by Council
GST Changes to Bring Broad-Based Benefits to the Auto Industry
Global brokerage firm CLSA cited that GST plus cess has dropped across all automobile categories, which has formed a broad-based benefit for industry players.
Entry-level cars (less than four meters in length, petrol up to 1,200cc and diesel up to 1,500cc) will see a reduction from 29% (28% GST plus 1% cess) to 18%.
GST on Two-Wheelers Below 350cc Reduced from 28% to 18%
From 28% to 18% tax on the commercial vehicles.
Mid-to-high-end SUVs (longer than four meters) will drop from 50% (28% GST plus 22% cess) to 40%.
No revision is there in the tractors as input tax credit (ITC) adjustments will offset the cut.
The only category to encounter higher taxes is the motorcycles above 350cc, which has risen from 31% (28% GST plus 3% cess) to 40%.
Demand shall surge from this GST rate reduction, and the sentiments of the automobile sector will be turned positive from this, CLSA believes.
How Stocks Will Be Affected
- Passenger Vehicles (PVs): Most of the advantage will be obtained by Maruti Suzuki, followed by Hyundai Motor India and Mahindra & Mahindra. As Jaguar Land Rover (JLR) and Tata Technologies account for 41% of its sum-of-the-parts valuation in Tata Motors thus the gain will not be higher.
- Two-Wheelers (2Ws): There will be equal advantage to Hero MotoCorp, Bajaj Auto, and TVS Motor. Royal Enfield motorcycles with engine capacity below 350cc have about 91% of their FY25 volumes, thus it will benefit.
- Commercial Vehicles (CVs): Ashok Leyland and Tata Motors are anticipated to witness a positive impact.
