New GST Rates: GST Cuts on Large SUVs & Luxury Cars: Toyota Fortuner, Mercedes-Benz GLS, & More Will Become Affordable
With the new GST slabs coming into effect, Large SUVs and Luxury cars may get cheaper by up to 10 percent
Published On Sep 04, 2025 07:06 PM By Ansh
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Premium sedans, big muscular SUVs, and top-notch luxury cars have always been aspirational for many, and for that aspiration, they ask for a huge sum of money. A reason for their prices to be so high is the GST and compensation cess placed by the government. However, this is about to change as the new GST slab for these vehicles will kick in from September 22, making such vehicles slightly affordable.
What Changed?
Earlier, the GST applicable on all cars over 4 metres used to be 28 percent, and on top of the GST, a compensation cess was placed which ranged from 15 percent to 22 percent. Now, while the GST has been increased to 40 percent, the compensation cess has been completely removed, which lowers the overall tax applied.
Since all large SUVs and luxury cars are over 4 metres in length, they will all be placed under a single GST slab of 40 percent.
| Hybrid Passenger Vehicles |
|||
| GST |
Compensation Cess |
Total Tax |
|
| Old |
28% |
15% |
43% |
| New |
40% |
0 |
40% |
| Difference |
+12% |
3% |
|
Strong hybrid passenger vehicles like the Toyota Vellfire, Lexus LM, and BMW XM, which used to attract 43 percent total tax, will now ask for a GST of 40 percent.
| Passenger Vehicles popularly known as SUVs (Above 4m in length, above >1500cc engine & >170 mm Ground Clearance) |
|||
| GST |
Compensation Cess |
Total Tax |
|
| Old |
28% |
22% |
50% |
| New |
40% |
0 |
40% |
| Difference |
+12% |
10% |
|
All large SUVs which fulfil the criteria of length, engine size, and ground clearance used to have a total tax of 50 percent. This included cars like the Toyota Fortuner, Mercedes-Benz GLS, Jeep Wrangler, BMW X5, and more.
Under the new tax slab, the total tax on these cars will go down to 40 percent, resulting in a reduction of 10 percent, which is expected to be passed down to the customers.
| Vehicle Over 1500cc |
|||
| GST |
Compensation Cess |
Total Tax |
|
| Old |
28% |
20% |
48% |
| New |
40% |
0 |
40% |
| Difference |
+12% |
8% |
|
Luxury sedans like the Mercedes-Benz S-Class, Audi A6, BMW 7 Series and even performance cars made in the country will get a GST reduction of 8 percent.
Note: All imported cars whether CBUs (completely built up units) or CKDs (completely knocked down units) will have the same tax as before. 100 percent for CBUs and 50 percent for CKDs.
Also Read: GST Rate Cut For Cars: Cess Removed, All Cars To Get Cheaper
Other Benefits
The ex-showroom price of the vehicle consists of the factory price, GST, and compensation cess. Since the total tax will be reduced and the ex-showroom price will be lower, you’ll also need to pay a lower RTO tax. This will make your car’s on-road price more affordable.
With the new GST reforms, the cost of parts and components will be placed in the 5 percent slab instead of the previous 12 percent, and this may bring down the production cost of the vehicle, which will further reduce the factory price. However, even if this happens, the manufacturer may or may not choose to pass down these savings to the customer.
In any case, the cost of vehicles will go down due to the new GST norms.
Wait For New Prices
As mentioned earlier, these GST reductions will be applicable from September 22, and we expect manufacturers to announce the revised prices of their vehicles around the same date. If you are planning to buy a new car, we suggest you wait till the new prices are out.
When exactly the prices will be announced and how much the prices will go down is yet to be disclosed, but the new GST slabs will most definitely make large SUVs and luxury cars more affordable.
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