Thinking of buying your dream car? Now might be the perfect time! With the latest GST car price cut 2025, vehicles have become more affordable across every segment. Thanks to the new GST on cars in India, hatchbacks, SUVs, and even luxury models are now available at reduced prices, giving you the chance to complete your dream of owning a car. Whether you’re planning to upgrade or buy your first vehicle, this is big news—because car prices drop after GST update means more savings for you.
Hi, my name is Prithvi, and in this blog on DailyPedia24, I’ll guide you through the latest GST changes, explain the real benefits for car buyers, and tell you everything you need to know before making your next car purchase.
What’s New in GST – Effective September 22, 2025
- The GST Council has rolled out a sweeping overhaul of the indirect tax structure—popularly called GST 2.0—effective September 22, 2025 (the first day of Navaratri) .
- GST slabs have been simplified into three tiers:
- 5% (essential goods like medicines, soaps, FMCG),
- 18% (standard goods including small cars and TVs),
- 40% (luxury and sin goods, such as high-end vehicles, tobacco, aerated drinks)
Specifically for Cars, from September 22:
|
Vehicle Category |
Old Tax Structure |
New GST (No Cess) |
|
Small cars (<_4 m & <_1,200 cc petrol / <_1,500 cc diesel) |
28% + 1-3% cess (~29-31%) |
18% |
|
Mid/large cars, SUVs, >1,500 cc or >4 m |
28% + 17-22% cess (~45-50%) |
40% |
|
Electric Vehicles (EVs) |
5% GST |
5% (unchanged) |
Thats mean Under the new GST 2.0 rules effective from September 22, 2025, the tax structure for cars has been simplified, making vehicles more affordable. Small cars—those under 4 meters in length with petrol/CNG engines up to 1,200cc or diesel engines up to 1,500cc—will now attract only 18% GST instead of the earlier 28% plus cess, resulting in savings of up to ₹1 lakh. Mid-size cars and SUVs, with larger engines (above 1,200cc petrol or above 1,500cc diesel) and usually over 4 meters in length, earlier faced close to 50% tax but now fall under a flat 40% GST, leading to price cuts of ₹1–2.5 lakh. For luxury cars and premium SUVs, which previously attracted as high as 50% tax, the new 40% GST rate means customers can save anywhere between ₹3 lakh and ₹11 lakh depending on the model. Even auto parts and accessories now fall under the 18% slab instead of 28%, which further reduces long-term ownership and maintenance costs.
GST 2.0 on Bikes & Scooters (Effective September 22, 2025)
|
Vehicle Type |
Engine / CC |
Old Tax + Cess |
New GST 2.0 |
|
Small Motorcycles |
<_350cc |
28% + cess (~30-32%) |
18% GST |
|
Premium Motorcycles |
>350cc |
28% + cess (up to 45%) |
28-40% GST |
|
Electric Bikes / Scooters |
All EVs |
5% GST |
5% GST |
|
Scooters & Mopeds |
<_125cc |
18% GST |
18% GST |
No More Compensation Cess
Under GST 2.0, the Compensation Cess, which added up to 22% on mid-size and luxury cars, has been removed. This change reduces the overall tax burden, making vehicles more affordable for buyers. Combined with the new GST rates, this is a major saving opportunity, especially for SUVs, premium cars, and luxury models.
The GST 2.0 update (effective September 22, 2025) is not just about cars
Tractors
- Tractors were already in a low GST category (12%), and in GST 2.0 they remain at concessional rates since they are considered agricultural equipment.
- No big change like cars. Farmers continue to get relief.
Trucks & Commercial Vehicles
- Trucks & goods carriers earlier had 28% GST.
- Under GST 2.0, most commercial vehicles (including buses, trucks) are shifted to the 18% standard slab.
- This means lower costs for transporters & logistics companies → expected to reduce freight rates over time.
Buses (Passenger Transport)
- Smaller buses and e-buses benefit with 18% GST (was higher earlier).
- Electric buses continue under 5% GST to encourage clean mobility.
also visit:-future of ev &used ev cars in us
When Do These Rules Apply?
- The new GST rates come into force from September 22, 2025. After this date, all car purchases will follow the revised tax regime, regardless of when the invoice is raised—as long as the supply is made after the effective date .
- Manufacturers—including Tata, Hyundai, Audi, Lexus, and Skoda—have announced that they will pass on the full GST benefits to buyers, with revised prices also kicking in from September 22
How Much Can You Save After GST 2.0?
The new GST update directly reduces car prices across all segments. Here are some quick examples of savings:
|
Car Example |
Segment / Engine |
Savings After GST(₹) |
|
Maruti Swift / Wagon R |
Small car (Petrol <_1200cc) |
60,000-1,00,000 |
|
Hyundai Creta / Kia Seltos |
Mid-size SUV (Petrol/Diesel >1200cc/1500cc) |
70,000-2,40,000 |
|
Mahindra Thar / XUV700 |
SUV (Diesel >1500cc) |
1,00,000-1,50,000 |
|
Toyota Fortuner |
Large SUV (Diesel >1500cc) |
Up to 3,49,000 |
|
Hyundai Tucson |
Premium SUV |
Up to 2,40,000 |
|
Skoda Octavia / Superb |
Luxury Sedan |
Up to 3,30,000 |
|
Audi Q5 / Q7 |
Luxury SUV |
2,60,000-7,80,000 |
|
BMW 3 Series / X5 |
Luxury Sedan/SUV |
Up to 8,90,000 |
|
Mercedes-Benz (E-Class, GLE, GLS) |
Premium Luxury |
2,60,000-11,00,000 |
Why This GST Update Matters
The government’s move to simplify GST and reduce rates for cars is aimed at boosting consumer affordability and stimulating the automotive sector. High taxes earlier made small and mid-size cars expensive, discouraging many potential buyers. By reducing GST, the government is encouraging more vehicle sales, supporting manufacturers, and giving a push to the festive season market. Additionally, lowering taxes on vehicles helps increase formal compliance, reduce black-market transactions, and simplify the tax system. For consumers, it means more affordable options, while for the economy, it stimulates production, employment, and growth in related sectors like auto parts, logistics, and dealerships. This step also indirectly promotes cleaner, more efficient vehicles, especially if extended further to Electric Vehicles, supporting India’s green mobility goals.
What Buyers Should Know
With the new GST 2.0 rules effective from September 22, 2025, car buyers can enjoy significant savings, but there are a few things to keep in mind. Prices may vary by model, engine type, and dealer, so always confirm the final cost before booking. Some manufacturers have already passed on GST benefits, while others will update prices closer to the effective date. Additionally, state-level registration fees, insurance, and optional accessories are not included in the GST reduction, so total expenditure may differ. For those considering Electric Vehicles (EVs), remember they already enjoy 5% GST, making them a cost-effective and eco-friendly ch
What About Cars Already in Showrooms & the Cess Factor
Cars already in dealer inventory before September 22, 2025 may or may not reflect the new GST rates. Some dealerships might pass on the GST benefits immediately, while others may apply the revised rates only to new bookings or vehicles supplied after the effective date. Additionally, under the new GST 2.0 rules, the Compensation Cess, which previously added up to 22% on mid-size and luxury cars, has been removed. This means buyers of eligible vehicles—both in-stock and newly supplied—can benefit from lower overall tax and better savings. Always check with your dealer to confirm how much of the GST reduction and cess removal applies to the car you plan to buy.
Disclaimer: Prices and savings shown are indicative and may vary by model, dealer, and location—please confirm with your nearest showroom.
Frequently Asked Questions about GST 2.0 Car Update
What is the GST 2.0 update for cars in India?
The GST 2.0 update, effective from September 22, 2025, simplifies car tax slabs. Small cars now attract 18% GST, while mid-size and luxury vehicles are taxed at 40%. Learn more at DailyPedia24.
Does the new GST 2.0 remove the compensation cess on cars?
Yes, under GST 2.0, the compensation cess, which previously added up to 22% on mid-size and luxury cars, has been removed. This reduces the overall cost of vehicles. For full details, visit DailyPedia24.
Which cars benefit the most from the new GST 2.0 update?
Small hatchbacks and mid-size SUVs benefit significantly due to lower GST rates, while luxury cars see reduced costs with the removal of compensation cess. See complete savings examples at DailyPedia24.
Does GST 2.0 apply to cars already in showrooms?
Cars already in dealership inventory may or may not reflect the new GST rates. Some dealers pass on benefits immediately, while others apply it to new supply. Check the latest updates on DailyPedia24.
Are Electric Vehicles (EVs) affected by GST 2.0?
EVs continue to enjoy 5% GST under GST 2.0, encouraging buyers to adopt eco-friendly vehicles. Learn more about EV benefits in this GST update at DailyPedia24.