New Delhi: The revised GST rates are set to reshape India’s heavy industries, with a special emphasis on the automobile sector. The tax cuts, spanning two-wheelers, cars, tractors, buses, trucks, and auto components, aim to stimulate demand, generate employment, and support the broader manufacturing ecosystem.
GST Impact on Automobiles
The new GST regime delivers relief across the automobile industry. Categories such as bikes up to 350cc, small cars, medium and luxury cars, buses, and tractors under 1800cc are witnessing reduced tax rates. Auto components like tyres, batteries, glass, plastics, and electronics are also benefiting from lower rates.
Industry experts note that increased sales of vehicles will generate higher demand for components, creating a multiplier effect for MSMEs that dominate the auto supply chain. The automobile industry directly and indirectly sustains over 3.5 crore jobs across manufacturing, sales, maintenance, and financing. The demand surge is expected to drive fresh hiring in dealerships, logistics, transport, and MSME suppliers, while also benefiting informal jobs such as drivers, mechanics, and small garages.
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GST Rates Cuts on Two-Wheelers and Cars
- Two-Wheelers (up to 350cc): GST reduced from 28% to 18%, making bikes more affordable for youth, professionals, and rural households. This is expected to benefit farmers, gig workers, and small traders by reducing costs of ownership and EMIs.
- Small Cars: GST rates lowered to 18% (from 28%) for petrol cars under 1200cc and diesel cars under 1500cc with length not exceeding 4 meters. The reduced rates will boost first-time ownership, particularly in small towns and semi-urban markets.
- Large Cars: GST rates rationalized to a flat 40% with removal of cess. This simplifies taxation and allows full Input Tax Credit (ITC), making large cars more affordable and encouraging aspirational purchases.
GST Rates: Impact on Tractors and Agriculture
- Tractors under 1800cc: GST cut from 12% to 5%.
- Road Tractors over 1800cc: Reduced from 28% to 18%.
- Tractor Parts: Taxed at 5%.
India, being among the largest tractor markets, will see improved affordability driving higher mechanization in agriculture. Ancillary MSMEs producing tyres, engines, hydraulic pumps, and spares will benefit from increased orders. The GST cut is also expected to strengthen India’s global positioning in tractor exports and improve crop productivity.
Also Read: GST on Fisheries Sector Reduced to 5%: Major Boost for Fish Farmers and Seafood Exports
Buses and Commercial Goods Vehicles
- Buses (10+ seater): GST reduced from 28% to 18%, making them more affordable for schools, corporates, fleet operators, and state transport undertakings. Lower prices are expected to reduce passenger fares, encourage fleet modernization, and promote public transport adoption.
- Commercial Goods Vehicles (Trucks, delivery vans): GST cut from 28% to 18%. This will reduce the capital cost of trucks, lower freight rates, and decrease logistics costs across FMCG, steel, cement, agriculture, and e-commerce supply chains.
The reduction in insurance GST for goods carriers from 12% to 5% (with ITC) further supports the logistics sector, aligning with the National Logistics Policy and PM Gati Shakti framework.
GST Rates: Benefits for Auto Components and Transport Services
The GST on most auto components has been rationalized to 18%. Additionally, services linked to passenger and goods transportation now have dual options of 5% or 18% GST, giving businesses flexibility and reducing cascading tax impacts.
Policy Outlook
The GST cuts across heavy industries are expected to promote Make in India, support cleaner mobility through faster replacement of older vehicles, and enhance financial inclusion by boosting credit-led purchases in semi-urban and rural areas.
K N Radhakrishnan, Director & CEO, TVS Motor Company, said: “The GST rate rationalisation is a bold and transformative move that will accelerate consumption across society. We sincerely thank the Government of India for these progressive reforms. The Government’s consistent efforts to boost growth and strengthen the middle class’s spending power are vital steps towards realising the Prime Minister’s vision of Viksit Bharat 2047. We will pass on the the full benefit of GST rate reduction to customers across our ICE portfolio. TVS Motor remains committed to providing mobility solutions that are trusted, reliable and provide unparalleled user experience.”
