Table of Contents
Introduction
The Indian automobile industry has received a massive boost with the new GST rates on cars effective from September 22, 2025. The GST Council has simplified tax slabs, reduced rates on small cars and two-wheelers, and lowered the burden on SUVs and luxury cars. This change is expected to make vehicles more affordable, fuel festive demand, and uplift the overall auto sector.
In this article, we break down the new GST rates on cars, compare them with the old system, list the latest car price cuts by leading manufacturers, and explain how this reform benefits customers.
✅ Key Highlights of the New GST Rates (2025)
- Small Cars (Petrol ≤1200cc, Diesel ≤1500cc, length <4m): 18% GST (earlier 28% + cess ~30%)
- SUVs, Large Cars & Luxury Vehicles: 40% GST flat (earlier ~50% including cess)
- Electric Vehicles (EVs): 5% GST continues
- Two-Wheelers (up to 350cc): 18% GST (earlier 28%)
- Auto Components & Parts: 18% GST uniform rate
👉 This is one of the biggest tax reforms in the auto sector since GST was first introduced in 2017.
📊 Old vs. New GST Rate Comparison
| Vehicle Type | Old GST + Cess | New GST Rate | Price Impact |
|---|---|---|---|
| Small Cars | 28% + 1–3% cess (~30%) | 18% | Prices down by ₹40k–₹1.5 lakh |
| SUVs / Large Cars / Luxury | 28% + up to 22% cess (~50%) | 40% | Prices down by ₹1.2–₹2.5 lakh |
| Electric Vehicles (EVs) | 5% | 5% | No change (still cheapest) |
| Two-Wheelers ≤350cc | 28% | 18% | Prices cut by 8–12% |
| Auto Components | 28% (varied) | 18% | Cheaper maintenance & repairs |
🚙 Which Cars Got Cheaper? (Brand-Wise Impact)
🔹 Tata Motors
- Tiago: up to ₹75,000 cheaper
- Nexon: up to ₹1.55 lakh cheaper
- Harrier: ~₹1.4 lakh cut
- Safari: ~₹1.45 lakh cut
🔹 Mahindra & Mahindra
- XUV3XO (diesel): up to ₹1.56 lakh cheaper
- Scorpio-N: up to ₹1.45 lakh cheaper
- Thar Roxx: ₹1.33 lakh cut
🔹 Hyundai India
- Tucson: up to ₹2.40 lakh benefit
- Creta, Venue, Verna, i20: big festive discounts
🔹 Renault India
- Kwid, Kiger, Triber: up to ₹96,000 cheaper
🔹 Maruti Suzuki
- Expects 10% growth in small car sales due to GST cut
🎉 Why Buyers Will Benefit the Most
- Lower On-Road Prices – Cars are now cheaper across small, mid, and SUV categories.
- Festive Season Offers – Automakers are combining GST cuts with festive discounts.
- Affordable Loans – Lower car prices reduce EMI and down-payment burden.
- Cheaper Maintenance – With 18% GST on auto components, servicing costs will fall.
- Boost for EVs – Continued 5% GST encourages faster adoption of electric cars.
📈 Market Outlook
- Festive Car Sales: Expected to rise sharply in Oct-Nov 2025.
- Dealer Inventory: Currently at 56 days (vs. ideal 21), sales push will help clear stock.
- GDP Growth: GST 2.0 expected to add 1% to India’s GDP over the next year.
❓ FAQs on New GST Rates for Cars
Q1. When will the new GST rates be implemented?
➡️ From September 22, 2025.
Q2. Will SUV and luxury car prices drop significantly?
➡️ Yes, prices are expected to fall between ₹1.2–₹2.5 lakh depending on the model.
Q3. Are electric vehicles still at 5% GST?
➡️ Yes, EVs continue at 5% GST, making them the most tax-friendly segment.
Q4. How much will small cars get cheaper?
➡️ ₹40,000 to ₹1.5 lakh depending on brand and model.