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GST Rate Cut 2025: Modi’s Independence Day Announcement & Its Impact on Car, Bike and EV Prices in India

By Rev up with Surya

 GST 2.0: The Auto Industry’s Game-Changer or Just Another Promise?

What’s Changing?

  • On August 15, 2025, PM Narendra Modi announced sweeping GST reforms, simplifying the current system into two tax slabs—5% and 18%—while new 40% “sin goods” taxes will apply to luxury or restricted items.

  • The government plans to implement these reforms by Diwali 2025, calling it a “double Diwali” gift—reduced taxes, higher disposable income.

  • According to SBI, this reform could raise consumption by ₹1.98 lakh crore, though states may lose ₹85,000 crore annually.


How It Affects the Automobile Industry

Small Cars & Two-Wheelers

  • Expect GST on small petrol/diesel cars to drop from 28% to 18%, making them more affordable.

  • Two-wheelers could see similar relief, particularly in the mass and rural segments.

Luxury & Mid-Size Vehicles

  • These may move into the new 40% “sin-goods” slab, replacing the current combined GST + cess (~50%).

Market & Economic Impact

  • Auto stocks surged—Maruti Suzuki, Mahindra & Mahindra, Hero MotoCorp, and TVS Motor showed noticeable gains.

  • Jefferies and Morgan Stanley forecast a ₹2.4 lakh crore demand boost, with GDP getting a 50–70 basis point uplift.

  • This moves India toward a consumption-driven economy, with improved inflation outlook and potentially more RBI rate cuts.

What Should Consumers Do?

  • Thinking of buying a small car or bike? 2025 could be the most affordable year.

  • EV owners: You already have a 5% GST advantage—further benefits may narrow the gap with ICE vehicles.

  • Luxury car buyers: Brace for limited relief unless incentives are announced.

Impact of GST on Automobile Prices in India: Benefits and Drawbacks for Consumers

Final Thoughts

The GST 2.0 reform announced by PM Modi is a clear step toward restoring consumer confidence, stimulating demand, and particularly invigorating the automobile sector. Whether it transforms into long-term growth depends on execution—but for now, it’s a compelling trigger for your next car purchase.

Read more about automobiles at Rev Up with Surya


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