The Automotive Tyre Manufacturers’ Association (ATMA) has welcomed the Goods and Services Tax (GST) Council’s decision to reduce the GST rate on tyres from 28% to 18%, calling it a long-awaited reform that will lower vehicle operating costs and bring significant relief to the logistics sector and consumers alike.

This move, announced on Thursday, marks a major policy correction for a commodity that is widely regarded as an essential mobility component. According to ATMA, the revised tax slab will not only reduce the overall cost of transportation but will also have a positive ripple effect on the Indian economy, particularly in areas such as logistics, agriculture, and road safety.

Why the GST Cut Matters

Until now, tyres were taxed at 28%, placing them in the highest GST bracket, alongside luxury and demerit goods such as premium vehicles, tobacco, and alcohol. This categorization had been a long-standing point of contention for industry bodies, which argued that tyres are not a luxury but an essential requirement for mobility across all sectors.

From farmers using tractors, small traders relying on three-wheelers, and logistics companies operating large fleets of trucks and buses, tyres form the backbone of India’s mobility and goods movement network. A 28% tax rate not only made tyres more expensive but also discouraged timely replacement and proper maintenance, resulting in the prolonged use of worn-out tyres, which is a well-documented risk factor for accidents.

By bringing down the tax rate to 18%, the government has effectively acknowledged the essential nature of tyres. ATMA has praised the decision, noting that this will align taxation with ground realities while encouraging safer road practices.

Industry Reactions

ATMA Chairman Arun Mammen described the decision as a landmark reform for the tyre sector. In his statement, he emphasized that lower tyre costs will lead to more affordable mobility across India, benefitting not just urban motorists but also rural communities dependent on agriculture and trade.

He added:

“Lower GST on tyres will translate into more affordable mobility for millions of users – from farmers and small traders to transporters, motorists, and logistics operators. It will also help bring down vehicle operating costs, which in turn reduces overall logistics expenses in the economy.”

The industry body highlighted that the long-awaited correction will also boost consumer confidence, as people will no longer be forced to delay tyre replacements due to high prices. Instead, timely replacement will become more feasible, directly improving road safety standards.

Impact on Logistics and Transport

India’s logistics costs, estimated at around 14–15% of GDP, are among the highest in the world, largely due to inefficiencies in fuel, vehicle maintenance, and taxation. Tyres play a critical role in transport operations, and their high cost under the earlier GST regime directly impacted transporters, who often passed the burden on to end consumers.

By reducing the tax burden, the new rate is expected to:

• Lower operating costs for logistics companies.

• Boost competitiveness of Indian goods in domestic and international markets.

• Encourage timely tyre replacement, reducing breakdowns and delays in goods movement.

• Support fleet operators with lower maintenance costs and higher operational efficiency.

Road Safety Benefits

The safety dimension of this GST cut cannot be overlooked. Road accidents in India are often linked to worn-out tyres that fail under stress. With tyres now becoming more affordable, vehicle owners across segments – from two-wheelers to heavy commercial vehicles – are more likely to replace their tyres before they become hazardous.

This will:

• Reduce the risk of tyre bursts and associated accidents.

• Improve the braking efficiency of vehicles.

• Ensure better fuel efficiency, as properly maintained tyres contribute to smoother driving and reduced fuel consumption.

Tyre Industry Perspective

The Indian tyre industry is a ₹75,000 crore sector, employing millions directly and indirectly. The sector supplies tyres to every category of vehicle – trucks, buses, passenger cars, two-wheelers, tractors, construction equipment, and mining vehicles.

By reducing the tax rate, the government has given the industry a significant growth stimulus, which will allow it to:

• Expand manufacturing capacity.

• Increase exports.

• Boost demand from domestic consumers, especially in the aftermarket replacement segment, which forms the bulk of tyre sales.

Consumer and Economic Gains

For consumers, the price cut will make tyres more affordable, helping them manage household and business expenses better. For the economy, the reduction in logistics costs will directly support Make in India initiatives, lower the cost of goods movement, and contribute to India’s competitiveness in global trade.

This decision also aligns with the government’s larger push to reduce inflationary pressures and support sectors like agriculture and logistics, where tyres are a non-negotiable necessity.

Conclusion

The GST Council’s decision to reduce tyre tax rates from 28% to 18% is a major relief for consumers, transporters, and the tyre industry. It recognizes tyres as an essential good rather than a luxury item, and it has the potential to transform mobility economics in India.

By lowering vehicle operating costs and encouraging timely tyre maintenance, this move is expected to:

• Improve road safety.

• Enhance logistics efficiency.

• Strengthen India’s economic competitiveness.

In short, this long-awaited reform not only benefits millions of motorists and transport operators but also aligns taxation with the realities of mobility and safety in a growing economy.

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