GST Rate Cut On Cars: Hyundai Creta, VW Virtus, Mahindra Thar Roxx, And More Will Get CHEAPER!

• GST on all cars over 4 metres has been increased from 28 percent to 40 percent

• Compensation cess which used to range from 15 percent to 22 percent has been completely removed

• The removal of compensation cess will bring down the prices of four-wheelers

• These tax cuts will be applicable from 22 September 2025

22 September 2025 is the day Indians will start celebrating the auspicious festival of Navratri, but another reason to celebrate will be the reduction in the prices of four wheelers. Our finance minister, Smt Nirmala Sitharaman, has just announced the new taxes put on cars which will make them more affordable, and this article focuses on cars which are over 4 metres in length.

The Tax Change

Earlier, all cars over 4 metres, which include compact SUVs, mid-size SUVs, compact sedans, and MPVs used to attract a total GST of 28 percent, which was complemented by a compensation cess (CC) ranging from 15 percent to 22 percent. Now, while the GST for cars over 4 metres has increased to 40 percent, compensation cess has been completely removed, the benefits of which will be passed on to the customers as lower car prices.

Here are the differences in tax rates on different types of cars for better understanding:

• Examples: Tata Safari, Mahindra Thar Roxx, Mahindra XUV700, Mahindra Scorpio & Scorpio N, Tata Harrier, Toyota Fortuner, MG Gloster, Jeep Meridian

Note: Any car that has an engine over 1500 cc but does not fit the criteria of length and ground clearance will get a tax saving of 8 percent.

• Examples: Toyota Innova Hycross Hybrid, Honda City Hybrid, Maruti Grand Vitara Hybrid, Toyota Hyryder Hybrid, Maruti Invicto Hybrid

• Examples: Hyundai Creta, Hyundai Verna, Kia Seltos, Volkswagen Virtus, Skoda Slavia, Honda Elevate, Volkswagen Taigun, Skoda Kushaq, MG Astor

In all these cases, the compensation cess has been removed and the GST has been put as 40 percent. This means that the savings will range from 3 to 10 percent, depending on the type of car you choose.

Also Read: GST Rate Cut For Cars: Cess Removed, All Cars To Get Cheaper

Further Benefits

Until now, whenever you bought a car, the ex-showroom price already included GST and compensation cess. These taxes were applied on the factory price of the car, and once added, they together formed the ex-showroom cost.

With the new GST reforms, the tax rate on several auto parts and components has also been reduced. This reduction could lower the overall production cost of vehicles, which in turn may bring down their factory price. However, it remains to be seen whether car manufacturers will pass on the entire benefit to customers or retain part of the savings as additional margin

Nonetheless, the direct reduction in GST rates that we discussed earlier will still be applicable to the vehicles. That means buyers should definitely see lower prices, even if the manufacturer decides not to lower the factory price.

On top of all this, since the ex-showroom price of the car will be reduced due to these tax cuts, the RTO tax (which is calculated on the ex-showroom price) will also be less, resulting in an even lower on-road price.

Also Read: Why Buying A Small Car After September 22 Under The New GST Rule Could Save You Big Money

When To Buy

The Indian automotive industry usually witnesses a surge in sales every year during the festive season, and the new GST rates will be applicable right at the start of these festivities. Manufacturers are expected to announce the revised, lower prices around September 22, so you should make your booking after this date. 

The exact price cut on each car is yet to be determined and will be clear once official prices are announced. Nonetheless, if you are planning to buy a car anytime soon, we advise you to wait till 22 September if you want to take full advantage of the new tax structure.

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