GST 2.0: Rate cuts to boost auto demand, ancillary industries and jobs, says Heavy Industries Ministry

Ministry estimated that auto sector supports over 3.5 crore jobs directly and indirectly, and higher sales will open new opportunities.

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The Ministry of Heavy Industries on Monday said the sweeping GST 2.0 reforms will deliver a strong boost to the automobile and ancillary sectors, reducing prices across vehicle categories and spurring job creation across the supply chain.In a historic decision, the GST Council at its 56th meeting streamlined the indirect tax structure from four slabs (5, 12, 18, 28 per cent) to two main rates — 5 per cent (merit) and 18 per cent (standard) — along with a 40 per cent special rate for sin and luxury goods. The new regime, effective September 22, was announced days after Prime Minister Narendra Modi unveiled the reform from the Red Fort on Independence Day.

GST 2.0

For automobiles, GST rates have been cut across segments. Two-wheelers up to 350cc now attract 18 per cent GST, down from 28 per cent, while small cars also move to the 18 per cent slab. Buses with more than 10 seats will see GST fall from 28 per cent to 18 per cent. Tractors shift from 12 per cent to 5 per cent, with tyres and parts also brought under the 5 per cent rate. Large cars will be taxed at a flat 40 per cent, with the removal of cess making taxation simpler and more predictable.The ministry estimated that the auto sector supports over 3.5 crore jobs directly and indirectly, and higher sales will open new opportunities in dealerships, transport, logistics, and component manufacturing. Informal sector jobs such as drivers, mechanics, and small garages are also expected to benefit.It added that the GST cuts would encourage replacement of old vehicles with cleaner, fuel-efficient models, strengthening the push towards sustainable mobility and reinforcing India’s position as a global tractor and automotive manufacturing hub.