GST Council cuts tax on three-wheelers to 18% from 28%

India's GST Council on Wednesday approved a reduction in the goods and services tax on three-wheelers to 18% from the current 28%, a move set to lower costs for manufacturers and buyers in a segment vital to urban transport and last-mile logistics.

The decision, announced at the 56th meeting of the GST Council chaired by Finance Minister Nirmala Sitharaman, aims to rationalize tax rates across vehicle categories and stimulate demand in the automotive sector.

The three-wheeler segment, dominated by players like Bajaj Auto, TVS Motor, and Piaggio Vehicles, accounts for about 5–7% of India's overall automotive market by volume, with annual sales hovering around 500,000 units in recent years. However, growth has been hampered by the 28% GST rate introduced in 2017, which inflated ex-showroom prices by up to 10–15% compared to pre-GST levels.

Three-wheelers join small cars, motorcycles up to 350cc, buses, trucks, and ambulances in the reduced 18% bracket, down from the previous 28% rate. Auto parts across all categories will now attract a uniform 18% rate, addressing long-standing inverted duty structure issues that had complicated the supply chain.

As per an IMARC report, the India three-wheeler market size reached USD 379.2 million in 2024. Looking forward, the report expects the market to reach USD 770.7 million by 2033, exhibiting a growth rate (CAGR) of 8.2% during 2025–2033. Government incentives promoting electric mobility, rapid urbanization boosting last-mile connectivity, escalating demand for affordable public transport, expanding charging infrastructure, and rising e-commerce logistics adoption are key factors propelling India's three-wheeler market, fostering innovation, sustainability, and widespread accessibility in both passenger and cargo transportation segments across urban and semi-urban regions.