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GST Council Approves New Tax Structure for Automobiles

Strategic Insights

— 1 min read

As the GST Council approved a new tax structure for automobiles on Wednesday, revenue secretary Arvind Shrivastava revealed that the tax rate for big cars has been fixed at 40%, while levies on small cars and motorcycles up to 350cc have been reduced to 18%. This move comes at a time when SUV sales, the dominant segment in India's passenger vehicle market, have recorded their first monthly decline in more than five years. The new tax regime is designed to encourage compact cars and two-wheelers, segments that have lost ground during a decade-long surge in SUV demand.

Key Takeaways:

  • The GST Council has approved a new tax structure for automobiles, with big cars taxed at 40% and small cars and motorcycles up to 350cc taxed at 18%.
  • SUV sales have recorded their first monthly decline in more than five years, with a 2.1% year-on-year drop in June.
  • SUVs make up about 55% of all passenger vehicles sold, up sharply from 14.3% in FY15.
  • Luxury SUVs sold about 3,660 units in June, while non-luxury models sold 1.71 lakh units.
  • Automotive companies like Maruti Suzuki and Mahindra & Mahindra are betting on new models and a mid-to-high teens growth target for their SUV segment in FY26.
  • The market will test whether lower GST on hatchbacks and two-wheelers can revive demand in segments that once dominated Indian roads.

Statistics:

  • SUV sales fell 2.1% year-on-year to about 1.75 lakh units in June.
  • SUVs make up about 55% of all passenger vehicles sold, up sharply from 14.3% in FY15.
  • Luxury SUVs sold about 3,660 units in June.
  • Non-luxury SUVs sold 1.71 lakh units in June.
  • SUV sales rose just 5.6% to 5.72 lakh units in Q1 FY26, compared with an 11.3% rise in FY25.

Sources:

  • Times of India, "GST Council revises tax slabs for automobiles: Small vehicles get relief while SUVs face higher levy"
  • Jato Dynamics, "Monthly sales data for 2025 reveals a marked and consistent decline in SUV sales"
  • Economic Times, "GST 2.0 gets the green light; what gets cheaper and costlier from September 22?"
  • Times of India, "Reprint Rights: timescontent.com"

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