The 56th GST Council meeting has ushered in a significant rate overhaul for the automobile sector, effective from 22nd September 2025. In a significant move, Compensation Cess on automobiles is set to be entirely abolished. This structural shift has led to the simplification of GST rates across various vehicle categories, including two-wheelers, passenger vehicles, electric and hybrid vehicles, commercial vehicles, and special-purpose vehicles. The revised rate structure is expected to enhance compliance, reduce litigation, and provide fiscal clarity to OEMs, dealers, and buyers alike.

NJ Jain & Associates has formulated a comprehensive tabular summary comparing the pre- and post-September 22, 2025, tax rates, aiding stakeholders in understanding the effective change in indirect tax liability. With a deep sectoral grip and advisory experience with marquee auto sector clients, our analysis not only highlights rate changes but also anticipates transitional implications – particularly around Input Tax Credit (ITC) balances and pricing strategies. This change signifies not just a rate adjustment, but a regulatory inflection point for the automobile industry.

GST Rate Structure for Automobiles – Pre and Post 22nd September 2025

Disclaimer

1) This note is prepared basis the press release issued by the GST Council after conclusion of the 56th Council Meeting, final GST rates will be subject to issuance of official Notification
2) New Rates will become effective from 12 am of 22nd September 2025 as announced by the GST Council Compensation Cess will cease to exist on Auto sector effective from 22nd September, however any ITC lying in balance on that day shall be subject to any transition process announced. If no measures are announced, same will have to be written off.