GST Council Cuts Three-Wheeler GST Rate from 28% to 18%

The GST Council has given a big relief to India’s auto and transport sector by reducing GST on three-wheelers from 28% to 18%. This decision will directly lower the price of auto-rickshaws and small cargo carriers, making them more affordable for buyers and operators. For lakhs of drivers and small business owners, this comes as welcome news.

New Three Wheeler GST Rates

Until now, three wheelers are taxed at the highest GST slab of 28% which is almost at par with luxury items. This inflated the cost of vehicles is hurting demand in a price sensitive market. With the new revision, the GST rate on 3 wheelers has been brought down to 18%. This move puts them in line with other essential vehicle categories and makes ownership easier for both drivers and fleet owners.

Why the Auto Rickshaw GST Cut 28 to 18% Matters

The drop in GST means auto-rickshaws and cargo three-wheelers will now cost less. That’s a direct saving for drivers who often buy vehicles on loan. Less price also encourage more and faster vehicle replacement, which leads to newer and cleaner vehicles on the road. For a segment that serves people and small business daily, this cut could boost sales and improve livelihoods.

Broader Impact Across Commercial Vehicle GST Segments

The reduction is not limited to three-wheelers alone. The GST Council has restructured tax slabs across the auto sector:

• Small cars, bikes up to 350 cc, buses, trucks, ambulances, and even auto parts now fall under the 18% GST slab.

• Auto parts that earlier had varied tax rates are now taxed at 18%, reducing confusion in supply chains.

• Expensive vehicles, luxury cars and premium bikes above 350 cc move to a new 40% slab.

• Electric vehicles continue to enjoy the 5% GST rate which is keeping the push for greener mobility intact.

The Wider GST Council Reform: One Streamlined Tax System

This cut on three-wheeler GST is part of a much larger reform. The Council has simplified the GST structure by reducing four slabs (5%, 12%, 18%, 28%) to just two — 5% and 18%. New 40% slab has been created for luxury goods. These changes take effect from 22nd of September 2025, with the festive season, which is expected to lift consumer demand further.

Market Reaction and Economic Implications

Auto industry has reacted positively to the decision. Stocks of major vehicle makers like Mahindra & Mahindra, Eicher Motors, Maruti Suzuki, TVS Motor and Hero MotoCorp jumped 8% on the day of the announcement. Analysts believe the cut will drive fresh demand, especially in the entry-level and commercial vehicle segments, giving the sector strong momentum before the festive season.

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