Centre weighs GST reduction on tractors to 5%, buses to 18%: Report

Reduced levies on tractors and spare parts are anticipated to trim both purchase and upkeep costs, in turn, benefiting farmers.

The Centre is reportedly weighing a significant cut in Goods and Services Tax (GST) on buses and tractors to spur demand, reduce costs for farmers, and sustain growth in the automobile sector.

As per sources cited in a Financial Express report, the proposal seeks to lower GST on buses from 28 percent to 18 percent and on tractors from 12 percent to 5 percent.

The initiative is part of a broader effort to make farm equipment and transport vehicles more affordable, encouraging mechanisation and easing rural financial pressure, states the report.

Reduced levies on tractors and spare parts are anticipated to trim both purchase and upkeep costs, in turn, benefiting farmers.

Industry voices have, however, cautioned against possible complications.

Escorts Kubota’s CFO Bharat Madan, cited in the above-discussed report, warns that if tractor GST falls to 5 percent while inputs remain taxed at around 14–15 percent, input tax credit mismatches could raise working capital needs several times over, causing a financial strain.

Still, demand in the tractor market remains strong.

According to the Tractor and Mechanisation Association (TMA), domestic sales jumped 14 percent in January-July 2025 to 550,948 units compared to 484,024 a year earlier.

The finance ministry’s wider tax rationalisation plan proposes two key GST rates, 5 percent and 18 percent, with a steep 40 percent reserved for luxury and sin goods, alongside a roadmap to phase out the compensation cess by December.