SDG 8: Decent Work & Economic Growth | SDG 11: Sustainable Cities and Communities
Institutions: Ministry of Finance | Ministry of Road Transport & Highways
The GST Council in its 56th meeting has approved a rationalisation of GST rates on multiple categories of vehicles, with two-wheelers, cars, buses and commercial vehicles now taxed at 18 percent, while tractors have been placed in the lowest 5 percent bracket. The revised rates will take effect from 22 September 2025. The decision aims to make vehicles more affordable for consumers, enhance transport accessibility, reduce costs for logistics operators, and support MSMEs engaged in the auto and auto-components sector. By aligning rates across categories, the reform also seeks to simplify compliance and create a more consistent tax structure for the transport sector.
This move reflects an effort to balance revenue with developmental priorities, signalling tax rationalisation as a tool for economic stimulus. Lowering costs in the vehicle sector could have a multiplier effect by boosting rural mobility, supporting public transport affordability, and encouraging formalisation in the auto-component supply chain.
Relevant Question for Policy Stakeholders: How can the benefits of GST reduction in vehicles be maximised to strengthen rural mobility, urban transport systems, and MSME competitiveness without creating fiscal imbalances?
Follow the full news here: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2165916