GST Slabs: Defining Luxury vs Mass for Cars & Bikes

GST Slabs: Defining Luxury vs Mass for Cars & Bikes

Last Updated Sep - 03 - 2025, 03:53 PM | Source : Fela News

GST Council may cut basic rates but define what's luxury in cars and bikes with higher taxes.

Imagine walking into a showroom for a new motorcycle or car and not knowing upfront how much GST you'll pay. That’s the confusion India is tackling now.

The GST Council is overhauling the tax structure: moving from four slabs (5%, 12%, 18%, 28%) to much simpler two main ones 5% and 18% with a steep 40% for luxury and “sin” goods. The question now: where do cars and bikes fall? 

Here’s what's likely:

• GST on small petrol cars (≤ 1,200 cc) can be reduced from 28% to 18%, which will benefit companies like Maruti and Toyota. However, Tata and Mahindra who are paying attention to most electric vehicles (EVS) will not get the benefit of this.

• GST on luxury EV priced at Rs 20–40 lakh can increase from 5% to 18%; At the same time, trains above Rs 40 lakh can be taxed up to 28–40%, which will affect companies like Tesla, BMW and Byd.

On two-wheelers, the proposal aims to bring all under 18% GST, but bikes over 350cc could face 40% a move that Royal Enfield and Bajaj strongly oppose.

For the government, the balance is delicate. Reducing GST on essential vehicles would cost ₹25,000 30,000 crore, while tax hikes on luxury vehicles may gain only ₹5,000–7,000 crore.

In short, the Council must decide not just tax numbers but definitions: what counts as regular, and what qualifies as luxury and how this will shape India’s auto market.

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