← Policy & Regulation: Pricing and Tariff Control (all topics)
GST 2.0
What it is
The 56th GST Council reform effective 22 Sep 2025, collapsing the old 5/12/18/28% structure into two main slabs of 5% and 18%, with a 40% demerit rate for luxury and sin goods and abolition of the compensation cess on most categories
For autos, two-wheelers up to 350cc and small cars moved from 28% to 18%, motorcycles above 350cc rose to 40%, EVs stayed at 5% and individual life and health insurance premiums went to nil
Impact on industries
- A direct price cut on mass mobility - a 10-point reduction on sub-350cc two-wheelers and small cars reaches exactly the price-sensitive buyer who drives volume
- Cess abolition simplifies pricing and releases the working capital previously locked in cess computation and credit
- Premiumisation is taxed against: above-350cc motorcycles jumped from 28% to 40%, penalising the mix shift manufacturers had been relying on for realisation growth
- EVs keep only a 13-point edge over ICE two-wheelers instead of 23, weakening the tax case for electric just as purchase subsidies taper