Posted On: 08 SEP 2025, 1:56 PM | By PIB Delhi
In a major policy overhaul aimed at bolstering India’s industrial growth and economic dynamism, the Government of India has introduced significant changes to the GST rates impacting key heavy industry sectors, notably automobiles, transport, and ancillary manufacturing industries. These sweeping reforms promise to enhance affordability, boost demand, support MSMEs, promote job creation, and improve overall competitiveness.
Automobile Sector: Major Rate Cuts to Stimulate Growth
The automobile sector, which supports over 3.5 crore jobs across manufacturing, sales, financing, maintenance, and logistics, stands to benefit immensely from the revised GST regime.
Two-Wheelers:
- GST Slashed from 28% to 18% for bikes up to 350cc.
- Expected Impact:
- Lower costs for rural and semi-urban consumers, farmers, small traders, and gig workers.
- Increased affordability, higher ownership rates, and improved financial inclusion through reduced EMIs on 2-wheeler loans.
Small Cars:
- GST reduced to 18% from 28% for small petrol cars (<1200 cc, <4m length) and diesel cars (<1500 cc, <4m length).
- Expected Impact:
- Cheaper small cars to encourage first-time ownership and household mobility, especially in Tier-2 and Tier-3 cities.
- Positive spillover to car dealerships, service centers, auto financing companies, and informal mechanics.
Large Cars:
- Flat 40% GST rate, with complete removal of additional cess.
- Expected Impact:
- Simplified tax structure, improved predictability.
- Eligibility for full Input Tax Credit (ITC), driving fresh investments.
- Encourages replacement of old vehicles with newer, fuel-efficient models, advancing the clean mobility agenda.
Tractors:
- GST reduced from 12% to 5% for <1800 cc tractors; parts also taxed at 5%.
- Road tractors (>1800 cc) now taxed at 18% (down from 28%).
- Expected Impact:
- Surge in mechanisation across agriculture, improving yields of staples like wheat and paddy.
- Growth of India as a global tractor manufacturing hub.
- Boost for MSME ancillary manufacturers producing engines, hydraulic pumps, tyres, and spares.
Public & Commercial Transport Sector: Boost to Mobility and Logistics
Buses (10+ seaters):
- GST reduced from 28% to 18%.
- Expected Impact:
- Lower upfront costs spur fleet expansion by corporates, schools, state transport entities, and tour operators.
- Cheaper public transport leads to increased passenger uptake, reduced congestion, and environmental benefits.
Goods Vehicles (Trucks, Delivery Vans):
- GST cut from 28% to 18%.
- Third-party insurance for goods vehicles now attracts 5% GST with full ITC eligibility.
- Expected Impact:
- Reduced capital expenditure leads to lower freight costs.
- Facilitates cheaper movement of agricultural produce, cement, steel, FMCG, and e-commerce deliveries.
- Strengthens MSME truck operators, improving logistics efficiency.
- Helps align with PM Gati Shakti & National Logistics Policy targets.
Auto Components & Service Industry: Simplification and Growth
- Majority of auto components now attract 18% GST.
- Services linked to goods and passenger transport are rationalized with applicable ITC benefits to avoid cascading tax burdens.
- Transport businesses now have a choice between 5% and 18% GST rates, depending on their operational needs.
Overall Impact: Economic and Employment Uplift
- Increased vehicle sales will spur demand across the supply chain, benefiting MSMEs, informal sector workers (mechanics, drivers), and financing entities.
- Encourages “Make in India” ethos by providing policy certainty and stimulating fresh investments in the manufacturing sector.
- Drives cleaner mobility and higher agricultural mechanisation.
- Contributes to the broader goal of promoting sustainable economic development, financial inclusion, and reduced inflationary pressures.
Conclusion
This bold GST reform is designed not just as a tax adjustment, but as a comprehensive stimulus for India’s industrial and economic landscape. By making automobiles and transport vehicles more affordable and simplifying tax structures, the government is paving the way for a resilient, competitive, and future-ready economy.
Click Here To Read Press Release
Read More: ED Uncovers Massive Gold Smuggling Racket from China into India Worth Rs 800 Crore
