The GST Council has officially announced the Goods and Services Tax (GST) on electric vehicles (EVs) will be 5%, which confirmed the CNBC-TV18 newsbreak on this matter.

In a post-GST Council briefing, Finance Minister Nirmala Sitharaman annouced the Next-Generation reforms in GST on Wednesday.

Under the revamped tax structure, the GST is reduced into fewer slabs, 0%, 5%, 18%, and 40%, aiming at simplification while cushioning essential items and renewable energy, and keeping luxury and demerit goods expensive. The premium EVs were speculated to be moved into a higher bracket but policymakers have ruled this out for now. All EVs, including imported luxury models, will continue to benefit from the same low rate.

During my Independence Day Speech, I had spoken about our intention to bring the Next-Generation reforms in GST.

The Union Government had prepared a detailed proposal for broad-based GST rate rationalisation and process reforms, aimed at ease of living for the common man and…

— Narendra Modi (@narendramodi) September 3, 2025

Petrol, LPG and CNG vehicles of less than 1,200 cc and not more than 4,000 mm length and diesel vehicles of up to 1,500 cc and 4,000 mm length would move to 18% rate from the current 28%.

Motorcycles up to 350 cc, consumer electronics like ACs, dishwashers, and TVs too would be taxed at a lower GST of 18 per cent as against 28 per cent currently.

All automobiles above 1,200 cc and longer than 4,000 mm as well as motorcycles above 350 cc, yachts and aircraft for personal use, and racing cars will be charged with a 40% levy.

Saurabh Agarwal, Partner & Automotive Tax Leader, EY said, “The rationalization of GST rates on automotive vehicles and parts is a truly welcome and significant development. By making vehicles more affordable across all segments, this move will not only boost consumer spending but also simplify complex classification disputes that have long burdened the industry. The discontinuance of the cess is a particularly pragmatic step, which will provide much-needed support to a sector that is a vital contributor to our nation’s GDP”.

First Published: 

Sept 3, 2025 11:45 PM

IST