What’s Changed in GST for Cars?
Starting 22 September 2025, the GST Council simplified automobile taxes. Previously, cars were taxed using multiple slabs and variable cesses. Now:
- Small cars (under 4 metres in length, petrol/CNG/LPG up to 1,200 cc or diesel up to 1,500 cc) will have a flat 18% GST, down from 28% plus ces
- Larger cars, SUVs, and high-end models now attract 40% GST, with no extra cess, unlike before when total tax could reach 50%.
This makes tax calculation clearer and cars generally more affordable
How Much Will Prices Drop?
Different car manufacturers have already passed on these savings to customers:
- Mahindra: Price cuts range from ₹1.01 lakh to ₹1.56 lakh across popular models like the Scorpio-N, Thar, XUV3XO, and Bolero. Effective 6 September.
- Tata Motors: Discounts up to ₹1.55 lakh on cars like Tiago, Nexon, Altroz, Safari, and Punch. Effective 22 September
- Renault: Price reductions up to ₹96,395 on models like Kwid, Triber, and Kigers
- Hyundai: Cuts up to ₹2.4 lakh, including ₹60,640 on models like Verna and up to ₹2.4 lakh on the Tucson.
- Kia: Discounts from ₹48,000 to ₹4.49 lakh on models like Sonet, Syros, Seltos, Carens, and Carnival.
- Audi: Luxury segment sees big savings—between ₹2.6 lakh and ₹7.8 lakh on models ranging from A4 to Q
Analysts expect 12–12.5% price reduction on small cars, making them especially attractive for beginners and budget-conscious buyers
Why It’s Good for Indian Consumers
- Affordability: Reduced GST makes both small and large cars cheaper by tens of thousands—or even lakhs—of rupees.
- Festive Season Advantage: With major festivals like Navratri and Diwali coming up, people are more likely to buy now that prices are lowers
- Better for Used Cars and Financing: Lower ex-showroom prices also mean reduced road tax and easier financing, benefiting buyers across income levels.
- Boost for Auto Industry & Jobs: Lower prices can lead to higher demand, benefitting dealerships, manufacturers, service networks, and even gig workers like drivers and mechanics. This uptick also supports ancillary component industries.
At a Glance: What’s Happening
| Segment | Old Tax + Cess | New GST Rate | Approx. Price Reduction |
|---|---|---|---|
| Small cars (<4 m, ≤ 1.5L) | ~28% + cess | 18% | ₹60,000–1 lakh+ |
| Larger cars & SUVs | 43–50% (GST + cess) | 40%, no cess | Up to ₹2 lakh (SUVs/luxury segment) |
| Electric vehicles | ~5% | 5% (unchanged) | N/A |
The new GST rates make car ownership more accessible, especially for entry-level buyers. Luxury and SUV buyers also benefit from clean, predictable tax rates. With festive season around the corner, this is a golden time for car purchases. If you’re thinking about buying, this reform gives you even more reason to start planning a test drive—or to book soon.