Lower GST On Vehicles, Buses & Tractors To Boost Demand Of Auto & Transport Sectors

(MENAFN- KNN India) New Delhi, Sep 12 (KNN) Effective September 22, 2025, revised GST rates for the road transport and automobile sector are expected to make vehicles more affordable, strengthen supply chains, and boost demand in urban and rural markets.

The reform covers two-wheelers, cars, tractors, buses, commercial vehicles, auto components, and related services.

The revised tax structure introduces significant relief across the automobile and transport sector.

The GST on two-wheelers below 350cc has been reduced from 28 percent to 18 percent, a move aimed at improving mobility for youth, rural households, and gig workers.

Small cars will also attract 18 percent GST instead of 28 percent, encouraging first-time buyers and stimulating sales in smaller towns.

For larger cars, the previous 28 percent plus cess has been replaced with a simplified flat rate of 40 percent (including cess), allowing full input tax credit and easing compliance.

In the farm sector, GST on tractors below 1800cc has been cut from 12 percent to 5 percent, strengthening India's standing as a global tractor hub and supporting farm mechanisation.

Public transport is set to benefit as well, with the tax on buses with more than 10 seats brought down from 28 percent to 18 percent, making them more affordable and aiding fleet expansion.

Commercial goods vehicles too will now be taxed at 18 percent instead of 28 percent, a change expected to reduce freight costs and curb inflationary pressures.

For the ancillary sector, GST on auto components has been reduced from 28 percent to 18 percent, providing a major boost to MSMEs.

Additionally, the tax on insurance for goods carriages has been lowered from 12 percent to 5 percent with input credit, reducing operational expenses for transporters.

According to the government, the rate cuts will benefit over 3.5 crore workers employed in the auto and allied industries.

MSMEs in tyres, batteries, glass, steel, plastics, and electronics are expected to see higher demand, while job opportunities could expand for drivers, mechanics, gig workers, and service providers.

The GST Council underscored the environmental benefits of the reform, noting that lower prices may incentivise replacement of old, high-emission vehicles with fuel-efficient models.

Greater affordability of buses is expected to strengthen public transport adoption, easing congestion and lowering emissions.

On logistics, officials said reduced freight costs would support agriculture, FMCG, e-commerce, and industrial sectors while improving India's competitiveness in exports. The reform is also aligned with the National Logistics Policy.

(KNN Bureau)

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