Government of India Permits Revised MRP Declaration on Unsold Stock Amid GST Rate Changes and Overhaul for Auto Sector

The GST Council, during its 56th meeting, announced significant changes to the Goods and Services Tax (GST) rates for the auto sector, effective from September 22, 2025. These changes aim to streamline taxation and provide clarity for manufacturers, importers, and consumers. This blog provides a detailed overview of the revised GST rates, their implications, and the transition process for unsold stock and packaging materials.

Key Highlights of GST Rate Changes

Effective Date The new GST rates will come into effect from 12:00 AM on September 22, 2025, as per the GST Council’s announcement.
Cess Removal Compensation Cess on the auto sector will cease to exist from September 22, 2025. However, any Input Tax Credit (ITC) balance related to the cess will be subject to transition measures announced by the government. If no measures are introduced, the ITC balance will need to be written off.
Revised GST Rates for Vehicles The GST rates for various vehicle categories have been revised, with significant reductions in certain cases. Below is a summary of the changes:
- Electric Vehicles: GST remains unchanged at 5%, with no cess applicable.
- Two-Wheelers (Non-Electric): GST reduced from 28% to 18%.
- Passenger Vehicles:
  - Petrol/CNG/LPG vehicles with engine capacity ≤1200cc and length ≤4000mm: GST reduced from 28% to 18%.
  - Diesel vehicles with engine capacity ≤1500cc and length ≤4000mm: GST reduced from 28% to 18%.
  - SUVs/MUVs/MPVs with engine capacity >1500cc and length >4000mm: GST reduced from 28% to 40%, with cess removed.
- Hybrid Vehicles: GST reduced from 28% to 18% for certain variants, with cess removed.
- Commercial Vehicles: GST reduced from 28% to 18% for buses, tempos, and trucks.
Special Purpose Vehicles Vehicles like Ready-Mix Concrete (RMC) carriers will continue to attract 18% GST, with no cess applicable.

Transition Measures for Unsold Stock

The government has permitted manufacturers, packers, and importers to declare revised retail sale prices (MRP) on unsold stock manufactured, packed, or imported before the GST rate revision. This declaration can be made through stamping, stickers, or online printing, subject to the following conditions:

Original MRP Display: The original MRP must remain visible, and the revised price cannot overwrite it.
Price Adjustment: The difference between the original and revised MRP must reflect the exact change in GST rates, whether an increase or reduction.
Public Notification: Manufacturers must publish at least two advertisements in newspapers and circulate notices to dealers and legal metrology authorities, informing them of the price changes.

Use of Packaging Materials

Manufacturers and importers can continue using packaging materials or wrappers printed with the old GST rates until December 31, 2025, or until the stock is exhausted, whichever is earlier. Corrections to the MRP must be made using stickers, stamps, or online printing.

Implications for the Auto Sector

Cost Reduction for Consumers The reduction in GST rates, especially for non-electric two-wheelers and passenger vehicles, is expected to lower vehicle prices, making them more affordable for consumers.
Boost to Electric and Hybrid Vehicles The unchanged GST rate of 5% for electric vehicles and reduced rates for hybrid vehicles will encourage the adoption of environmentally friendly transportation options.
Simplified Taxation The removal of compensation cess simplifies the tax structure for the auto sector, reducing compliance burdens for manufacturers and dealers.
Transition Challenges Manufacturers and importers will need to ensure compliance with the revised MRP declaration rules and manage the transition of unsold stock effectively.

Conclusion

The GST rate changes announced by the GST Council mark a significant step toward rationalizing taxation in the auto sector. These revisions are expected to benefit consumers, promote sustainable transportation, and simplify tax compliance for businesses. As the new rates come into effect on September 22, 2025, stakeholders must prepare for a smooth transition and ensure adherence to the updated guidelines.

Listen to this on our #YouTube Channel

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

We offer Legal advice and litigation support in matters related to Indirect Tax-Customs, FTP, other Indirect Tax matters & Arbitration law, all sorts of Central licensing and related matters. Come and explore the new way of doing business with us!

Source: CBIC, Department of Consumer Affairs, Govt. of India

Disclaimer

Handy Download:

Changes in GST Rate wef 22/09/2025 for Automobile SectorDownload

Connect with us for more-

@ Team S J EXIM SERVICES, New Delhi, IN

CP: Ms. Shubhra Jha, Founder

Tel: +91-11-4999 2707 I +91-9999005693

Web: www.sjexim.services

EMAIL: operations@sjexim.services I shubhra@sjexim.services

Facebook: www.facebook.com/sjeximservices

LinkedIn: https://www.linkedin.com/company/90794255/admin/feed/posts/

YouTube: https://www.youtube.com/@sjeximIndia

Subscribe our WhatsApp Channel: https://whatsapp.com/channel/0029VaTxDT8JZg4CHEOSoK47

Subscribe our Telegram Channel: https://t.me/sjeximindia

S J EXIM Services