Not just EVs: GST reset quietly changes the game for bikes, buses, and your next car

India’s overhaul of the Goods and Services Tax (GST) regime, slashing rates across vehicle categories, is set to cut prices, boost domestic demand, and reshape the automotive sector—according to a new report by Crisil Intelligence.

The government’s revamped three-tier GST structure—5%, 18%, and 40%—replaces a fragmented tax system, and could serve as a major catalyst for India’s auto industry, Crisil Intelligence said in its latest impact note.

Electric vehicles (EVs) remain taxed at a favorable 5%, but it’s the internal combustion engine (ICE) and hybrid segments that will see the most immediate change. Crisil notes that prices of entry-level passenger vehicles like the Maruti Suzuki Wagon R, Swift, Dzire, and Tata Punch—previously taxed up to 31%—will now fall under the 18% GST slab, leading to a price reduction of up to 8.5%.

Mid-sized SUVs like the Maruti Brezza and Hyundai Creta will become cheaper by around 3.5%, while premium SUVs such as the Mahindra XUV700 and Toyota Innova will see prices fall by about 6.7%.

Two-wheelers under 350cc, which form the bulk of India’s motorcycle market, will now attract just 18% GST, dropping prices by around 7.8%. However, GST for premium bikes over 350cc has risen to 40%, increasing prices by nearly 7%, Crisil highlighted.

Commercial and rural mobility segments also benefit. Tractors and hydrogen fuel cell vehicles shift to the 5% slab, down from 12%. Three-wheelers, buses, and light to heavy commercial vehicles are now taxed at 18%, compared to the earlier 28%, significantly lowering ownership and operating costs.

According to Crisil Intelligence, the aftermarket stands to gain as well, with automotive components now uniformly taxed at 18%, down from 28% for many items—cutting part prices by up to 7.8%.

Looking ahead to fiscal 2026, Crisil projects high single-digit growth for two-wheeler sales, modest gains for passenger vehicles, and continued momentum for tractors with 4–7% growth. Commercial vehicle sales are expected to stay flat to marginally positive.

The logistics industry also sees cost relief. GST on multimodal logistics drops to 5%, and third-party insurance on goods carriers also falls to 5%. While large fleet operators may face near-term input credit issues, Crisil expects the structural impact to be positive.

“This is a strategically timed move to revive consumption, especially in rural and price-sensitive segments,” said Hemal Thakkar, Director, Crisil Intelligence.