The Indian government has introduced new GST slabs, reducing the number of tax slabs from 8 to 3, and reducing the tax on a wide range of products, including automobiles. The new GST will come into effect on 22 September 2025. The Finance Minister, Nirmala Sitharaman, said that these GST reforms are aimed at supporting the common man and correcting the long-overdue simplification of the tax structure. In this article, we explore the new GST on cars and how affordable cars will become after the new GST slabs come into effect.
New GST on Vehicles
As per the new GST structure, petrol cars, diesel cars, and hybrid cars with up to 4 meters in length or equipped with up to 1200cc petrol engines, or up to 1500cc diesel engines, will be levied 18% GST. Previously, these cars were levied 28% GST along with the Cess. Moreover, a uniform 18% GST has been introduced for all auto parts, regardless of their HS codes. Here is a table with the new tax and the old tax on vehicles.
| Type of vehicles | Old Tax (GST + Cess) | New Tax (GST) |
| Up to 4 meters, up to 1200cc petrol engine | 29% (28% + 1%) | 18% |
| Up to 4 meters, up to 1500cc diesel engine | 31% (28% + 3%) | 18% |
| Cars with 1201 – 1500cc engines | 45% (28% + 17%) | 40% |
| Cars with engines larger than 1500cc | 48% (28% + 20%) | 40% |
| Longer than 4 meters utility vehicles (170 mm ground clearance and above), larger than 1500cc engines | 50% (28% + 22%) | 40% |
| Up to 4 meters hybrid vehicles, up to 1200cc petrol engine/ 1500cc diesel engine | 28% (28% – GST only) | 18% |
| Hybrid vehicles with a larger than 1200 cc petrol engine/ 1500cc diesel engine | 43% (28% + 15%) | 40% |
| Electric vehicles | 5% (5% GST only) | 5% |
Goodbye Cess!
One of the key reforms to the tax structure is the elimination of Cess. Earlier, a compensation cess from 1% to 22% was levied on vehicles, depending on the category and powertrains. This would result in a total tax range of 29% to 50%. Since Cess has been removed altogether from all categories, products will be levied only under the new GST.
Cheaper hatchbacks after new GST reforms
All hatchbacks in India fall into the 18% GST category, as all of them are under 4 meters long and powered by engines either smaller than 1200cc (petrol) or 1500cc (diesel). Here is a look at some hatchback prices with old tax and their expected prices with the new tax.
| Hatchbacks | Old Tax | Current ex-showroom prices | New Tax | Expected ex-showroom prices | Difference |
| Maruti Suzuki Alto K10 | 29% (28% GST + 1% Cess) | Rs 4.23 – 6.21 lakh | 18% GST | Rs 3.76 – 5.53 lakh | Rs 47,000 – 68,000 |
| Tata Tiago | 29% (28% GST + 1% Cess) | Rs 5 – 8.55 lakh | 18% GST | Rs 4.45 – 7.61 lakh | Rs 55,000 – 94,000 |
| Maruti Suzuki Wagon R | 29% (28% GST + 1% Cess) | Rs 5.79 – 7.62 lakh | 18% GST | Rs 5.15 – 6.78 lakh | Rs 64,000 – 84,000 |
| Maruti Suzuki Swift | 29% (28% GST + 1% Cess) | Rs 6.49 – 9.65 lakh | 18% GST | Rs 5.78 – 8.59 lakh | Rs 71,000 – Rs 1.06 lakh |
| Hyundai i20 | 29% (28% GST + 1% Cess) | Rs 7.51 – 11.25 lakh | 18% GST | Rs 6.68 – 10.01 lakh | Rs 83,000 – Rs 1.24 lakh |
Cheaper compact SUVs after new GST reforms
Like the hatchbacks, most compact SUVs qualify for 18% GST, given all of them are sub-4-meter in length, or are powered by engines either smaller than 1200cc (petrol) or 1500cc (diesel). All the same, the Maruti Brezza qualify for the 40% GST slab, as its petrol engine is of 1500cc, i.e., larger than 1200cc. Previously, the Brezza would be levied a 45% tax, so its price would drop, but not as much as other compact SUVs. Here is a look at some compact SUV prices with old tax and their expected prices with the new tax.
| Compact SUVs | Old Tax | Current ex-showroom prices | New Tax | Expected ex-showroom prices | Difference |
| Tata Nexon | 29% (28% GST + 1% Cess) | Rs 8 – 15.60 lakh | 18% GST | Rs 7.32 – 14.05 lakh | Rs 68,000 – Rs 1.55 lakh |
| Mahindra XUV 3XO | 29% (28% GST + 1% Cess) | Rs 7.99 – 14.99 lakh | 18% GST | Rs 7.31 – 13.50 lakh | Rs 68,000 – Rs 1.49 lakh |
| Maruti Suzuki Brezza | 45% (28% GST + 17% Cess) | Rs 8.69 – 13.98 lakh | 40% GST | Rs 8.39 – 13.50 lakh | Rs 30,000 – 48,000 |
Cheaper SUVs after new GST reforms
While GST on cars longer than 4 meters has been increased from 28% to 40%, since the Cess has been removed, they will only be levied 40% tax, instead of the previous 50% tax, which would include 28% GST and 22% Cess. Meanwhile, the hybrid cars like the Maruti Suzuki Grand Vitara (strong-hybrid) would be levied only 40% tax, instead of the previously-imposed 43% (28% GST and 15% Cess). Here is a look at some SUV prices with the old tax and their expected prices with the new tax.
| SUVs | Old Tax | Current ex-showroom prices | New Tax | Expected ex-showroom prices | Difference |
| Hyundai Creta | 50% (28% GST + 22% Cess) | Rs 11.11 – 20.92 lakh | 40% GST | Rs 10.36 – 19.53 lakh | Rs 75,000 – 1.39 lakh |
| Maruti Suzuki Grand Vitara Petrol | 50% (28% GST + 22% Cess) | Rs 11.42 – 19.64 lakh | 40% GST | Rs 10.66 – 18.34 lakh | Rs 76,000 – 1.3 lakh |
| Maruti Suzuki Grand Vitara Strong-hybrid | 43% (28% GST + 15% Cess) | Rs 16.99 – 20.52 lakh | 40% GST | Rs 16.63 – 20 lakh | Rs 64,000 – 84,000 |
| Skoda Kushaq | 50% (28% GST + 22% Cess) | Rs 10.99 – 19.09 lakh | 40% GST | Rs 10.25 – 17.82 lakh | Rs 74,000 – Rs 1.27 lakh |
| Toyota Fortuner Diesel | 50% (28% GST + 22% Cess) | Rs 36.73 – 52.34 lakh | 40% GST | Rs 34.28 – 48.85 lakh | Rs 2.45 – 3.49 lakh |
| Mahindra XUV700 | 50% (28% GST + 22% Cess) | Rs 14.49 – 25.14 lakh | 40% GST | Rs 13.52 – 23.46 lakh | Rs 97,000 – 1.57 lakh |
Impact of new GST on used car prices
Since the prices of the used cars are usually proportional to new car prices, their prices may come down. However, there is a caveat. The GST rate on used or pre-owned cars is 12% of the transaction value if the car is bought from a registered used car dealer. However, this tax is imposed on the dealer’s margin, which is the profit earned on the sale. For example, if a car is purchased for Rs. 5 lakh and sold for Rs. 6 lakh, the GST is calculated on the Rs. 1 lakh profit. At the same time, with cheaper new cars available in the market, which will certainly appeal to buyers, the used car dealers can be compelled to lower the used car prices to remain strong in competition.
FAQs
What is the new GST on hatchbacks?
Every hatchback in India qualifies for the 18% GST, because all of them have their length under 4 meters and are powered by either petrol engines smaller than 1200cc or diesel engines smaller than 1500cc.
What is the new GST on SUVs?
Most SUVs in India are over 4 meters long; therefore, they would be levied 40% GST according to the new GST structure.
What is the new GST on auto parts?
As per the new GST, all auto parts will be uniformly levied 18% GST.
After the new GST, how affordable will the compact SUVs become?
Like the hatchbacks, most compact SUVs qualify for 18% GST, given all of them are sub-4-meter in length, or are powered by engines either smaller than 1200cc (petrol) or 1500cc (diesel). All the same, the Maruti Brezza qualify for the 40% GST slab, as its petrol engine is of 1500cc, i.e., larger than 1200cc. Previously, the Brezza would be levied a 45% tax, so its price would drop, but not as much as other compact SUVs.
