At a glance
- Effective from
- 22 September 2025
- Small cars
- 18%
- Bigger cars and SUVs
- 40%
- Bikes up to 350cc
- 18%
- Bikes above 350cc
- 40%
- Electric vehicles
- 5% (unchanged)
Source: GST Council, CBIC
Since 22 September 2025, GST on cars and two-wheelers works differently. The old system of 28% GST plus a compensation cess has gone. Small cars and most bikes now pay 18%, bigger cars and big bikes pay a flat 40%, and electric vehicles stay at 5%.
Here is how the new slabs work, which vehicles fall where, and why the price you see today may be lower than a year ago.
Key takeaways
- Small petrol and CNG cars under 4 metres with engines up to 1,200cc dropped from about 29% total tax to 18%.
- Bigger cars and SUVs moved to a single 40% rate, lower than the old GST plus cess of 45-50%.
- Motorcycles and scooters up to 350cc dropped from 28% to 18%; bikes above 350cc went up to 40%.
- GST is part of the ex-showroom price, so you do not pay it again on the on-road quote.
Old rates vs new rates
| Vehicle | Before (GST + cess) | From 22 Sep 2025 |
|---|---|---|
| Small petrol/CNG car (under 4m, up to 1,200cc) | 28% + 1% = 29% | 18% |
| Small diesel car (under 4m, up to 1,500cc) | 28% + 3% = 31% | 18% |
| Bigger cars, up to 1,500cc | 28% + 17% = 45% | 40% |
| Bigger cars, above 1,500cc | 28% + 20% = 48% | 40% |
| SUVs (over 4m, above 1,500cc, 170mm+ ground clearance) | 28% + 22% = 50% | 40% |
| Two-wheelers up to 350cc | 28% | 18% |
| Two-wheelers above 350cc | 28% + 3% = 31% | 40% |
| Three-wheelers | 28% | 18% |
| Electric cars and two-wheelers | 5% | 5% |
Which slab your car falls in
For cars, three things decide the rate: length, engine size and fuel. A car must be under 4 metres long and have a petrol, CNG or LPG engine up to 1,200cc, or a diesel engine up to 1,500cc, to get the 18% rate. That is why so many Indian hatchbacks, compact sedans and compact SUVs are just under 4 metres.
Anything longer, or with a bigger engine, pays 40%. Since the cess has been folded into that single rate, the total tax on big cars actually came down.
Two versions of the same SUV can sit in different slabs if one has a bigger engine. Compare ex-showroom prices variant by variant, not just model by model.
What changed for bikes and scooters
Most of India’s two-wheelers are under 350cc, so most buyers gained: the rate fell from 28% to 18%. Motorcycles above 350cc moved the other way, from a total of 31% to 40%. If you are choosing between a 350cc and a 400cc-plus bike, the tax gap is now wide enough to change the price comparison.
Electric vehicles stay at 5%
GST on electric cars, scooters and bikes did not change and remains 5%. The gap between EVs and petrol cars is now smaller for small cars, which pay 18%, but EVs still pay the lowest rate. Many states also cut or waive road tax on EVs, which can matter more than GST on the final price.
Electric two-wheelers also get up to ₹5,000 under PM E-DRIVE till 31 March 2028. Private electric cars get no central purchase subsidy.
Did prices actually come down?
Most manufacturers announced price cuts from 22 September 2025 to pass on the lower tax, and published revised price lists. The size of the cut depended on the slab: small cars and commuter bikes saw the biggest drops because their rate fell by 10 percentage points or more, while bigger cars saw smaller cuts because the change from 45-50% to 40% was smaller.
Prices do not stay still, though. Makers also revise prices for input costs and model-year changes, so a cut in September can be followed by a hike in January. Always check the current price list on the maker’s website rather than relying on an old news report.
Road tax in most states is charged on the ex-showroom price. When GST fell, the ex-showroom price fell, so the road tax amount usually came down a little too.
How GST shows up in your price
- Ex-showroom GST is already included in the ex-showroom price listed by the maker.
- On-road charges Road tax and registration are state charges, worked out separately.
- Insurance Insurance premiums carry their own GST, shown on the policy.
Questions buyers ask
Is there still a cess on cars?
No separate compensation cess applies under the new structure. It was folded into the 18% and 40% rates.
What is the GST on a 350cc motorcycle?
Two-wheelers up to 350cc pay 18%. Above 350cc, the rate is 40%.
Did GST on electric cars change?
No. It stays at 5%.
Is GST added on top of the on-road price?
No. It is already inside the ex-showroom price.
