Hyundai Motor India, the country’s second-largest carmaker in terms of volumes, on Thursday said that 60% of its internal-combustion engine (ICE) portfolio will fall under the 18% tax slab, following the GST Council’s decision to cut tax rates on small cars of up to 4 metres.

Welcoming the landmark GST reforms, Unsoo Kim, managing director Hyundai Motor India, said the tax cuts will provide a strong impetus to the Indian economy, enhance buoyancy and further strengthen consumer confidence.

“By reducing the tax burden on essential goods, the government has laid the foundation for inclusive growth and a robust, consumption-led economy,” Kim said, adding that the GST overhaul will directly benefit the automotive sector.

The GST reforms will boost demand across both urban and rural markets, he added.

These comments come a day after the GST Council slashed the tax rate on small cars up to 4 metres in length and motorcycles up to 350cc from 28% to 18%. The new rates will be effective September 22, 2025.

Mid-sized and large-sized ICE cars above 4 metres in length will be taxed at a uniform rate of 40% as against 43-48% earlier.

Electric vehicles will continue to attract only 5% GST.

“The GST Council’s decision to retain the 5% GST rate on electric vehicles is a forward-looking move that reinforces India’s commitment to sustainable, zero-emission mobility and signals long term policy stability,” said Shailesh Chandra, managing director, Tata Motors Passenger Vehicles Ltd and Tata Passenger Electric Mobility Ltd.

French carmaker Renault’s India managing director Venkatram Mamillapalle called the GST rate cut an “early festive gift” from the government that could lift consumer sentiment, ease household expenses, and strengthen confidence in long-term growth.

“For the automobile sector, the move is transformative. The GST reduction on the entry level car segment (petrol below 1200 cc and diesel below 1500 cc) from 28% to 18%, and a uniform rate for auto components at 18%, make personal mobility significantly more affordable for the masses,” said Mamillapalle.

The rationalised GST will ease household expenses, fuel consumption, and create a multiplier effect on long-term economic growth, he said. “With reduced taxes on tractors, agri-inputs and farm equipment, the GST reform will boost rural demand, strengthen agri-linked enterprises, and create new growth avenues in semi-urban and rural India. This will unlock fresh demand in Tier 2, Tier 3, and rural markets where improving farm incomes are driving aspirations for car ownership. We believe the reform will accelerate rural and urban demand alike,” he said.