GST new rates from cars to buses: Check FAQs explain what gets cheaper and what doesn’t

In a major push to make personal mobility and farm equipment more affordable, the GST Council on Wednesday approved steep tax cuts on vehicles and machinery. The announcement was made by Union Finance Minister and GST Council Chairperson Nirmala Sitharaman following the 56th Council meeting.

Effective September 22, 2025, the Goods and Services Tax (GST) on small cars, motorcycles up to 350cc, three-wheelers, buses, trucks, and ambulances will be reduced from 28% to 18%.

FAQs on GST Rates for Vehicles and Machinery

> What is the revised GST rate on small petrol, LPG, CNG, or diesel cars? What is covered under small cars?
The GST rate on all small cars has been reduced from 28% to 18%. For GST purposes, small cars mean:

Petrol, LPG, or CNG cars with engine capacity up to 1200 cc and length up to 4000 mm.

Diesel cars with engine capacity up to 1500 cc and length up to 4000 mm.

> What is the new GST rate on vehicles exceeding 1500 cc or length exceeding 4000 mm? What is the GST rate on utility vehicles?

All mid-size and large cars (vehicles exceeding 1500 cc or 4000 mm length) will attract 40%.

Utility vehicles (SUVs, MUVs, MPVs, XUVs) with engine capacity above 1500 cc, length over 4000 mm, and ground clearance of 170 mm or more will also attract 40% GST, without cess.

> What is the GST rate on 3-wheelers?
The rate has been reduced from 28% to 18%.

> What is the GST rate on buses and vehicles meant to carry 10+ persons?
Vehicles designed to transport ten or more persons (HSN 8702) will attract 18% GST, down from 28%.

> What is the GST rate on ambulances?
Motor vehicles cleared as ambulances with all required fittings will attract 18%, reduced from 28%.

> What is the GST rate on lorries and trucks?
Goods transport vehicles (HSN 8704) will now attract 18%, down from 28%.

> What is the GST rate on trailers and semi-trailers of tractors?

Tractors (other than road tractors for semi-trailers above 1800 cc) – 5%.

Road tractors for semi-trailers above 1800 cc – 18% (reduced from 28%).

>  What is the GST rate on motorcycles?

Up to 350 cc – 18%.

Above 350 cc – 40%.

> Does 18% apply to 350 cc motorcycles too?
Yes. The 40% rate applies only to motorcycles exceeding 350 cc.

> What will be the new rate for mid-size and big cars that earlier attracted 28% + cess (45–50% total)?
These will now attract 40% GST with no cess.

> Has GST rate been reduced on bicycles and parts?
Yes, from 12% to 5%.

> Why have small agricultural tractors not been fully exempted?

To balance relief for farmers with protecting domestic producers. Full exemption would block Input Tax Credit (ITC), raising costs for manufacturers and eventually consumers.