Automobile Prices May Drop by ₹36,000 as GST Reform Nears in 2025

In a recent meeting, the Group of Ministers (GoM) formed by the GST council has proposed a plan to simplify the tax structure that will lower the GST on vehicles.

At present, vehicles fall under four slabs: 5%, 12%, 18%, and 28%. The current GST regime makes tax compliance complex, especially for vehicles in the 28% bracket, where the total tax liability can touch 50% once cess is added.

According to the proposed reform of the GST council, the 12% and 28% slabs will be removed, retaining only the 5% and 18% slabs. Also, a 40% slab with cess concessions will be introduced for luxury vehicles.

If this recommendation gets approval, all internal combustion engine (ICE) vehicles, including passenger cars and two-wheelers, will move from the 28% slab to 18%. Electric vehicles will continue to enjoy the lowest GST rate of 5%.

The expected GST reform could bring significant price cuts for vehicles:

• Entry-level cars: Prices may drop by ₹30,000-₹36,000

• Big cars: Expected price reduction of 3%-5%

• Two-wheelers: Buyers may save ₹6,000-₹7,000

The simplified GST structure aims to ease tax compliance and reduce costs for both manufacturers and consumers.

Source: News18