The Government of India has recently updated the new GST rates on cars, and this change is likely to affect the final price you pay while buying a new vehicle. Whether you are planning to purchase a hatchback, sedan, SUV, or luxury car, it is important to understand how these new GST rates impact different segments.
What is GST on Cars?
GST is the tax applied on goods and services in India. For cars, GST is charged along with compensation cess depending on the type of vehicle. Together, these taxes make up a big portion of the car’s on-road price.
New GST Rates on Cars
Here’s a simplified table to help you understand the updated GST rates:
| CATEGORY | OLD GST + CESS | NEW GST | REDUCTION |
|---|---|---|---|
| Vehicles ≤ 4 m, petrol ≤ 1200 cc | 28% +1% | 18% | 11% |
| Vehicles ≤ 4 m, diesel ≤ 1500 cc | 28% + 3% | 18% | 13% |
| Vehicles > 4 m, 1201-1500 cc | 28% +17% | 40% | 5% |
| Vehicles > 4 m, < 1501 cc | 28% + 20% | 40% | 8% |
| UVs > 4 m, < 1500 cc, GC < 170 mm | 28% + 22% | 40% | 10% |
| Hybrids ≤ 4m, petrol ≤ 1200 cc/ diesel ≤ 1500 cc | 28% | 18% | 10% |
| Hybrids, petrol > 1200 cc / diesel > 1500 cc | 28% +15% | 40% | 3% |
| Electric Vehicles (all categories) | 5% | 5% | — |
(Note: Rates may vary slightly depending on government notifications and state-level charges like road tax, registration, and insurance.)
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What Does This Mean for You?
- Small car buyers will pay only a little extra, so the impact is minimal.
- SUV and luxury car buyers will see the biggest price jump due to higher cess.
- Electric vehicle buyers get relief as GST remains at just 5%, making EVs a cost-effective option.
Why the Change?
The government updates GST and cess rates to balance revenue collection and encourage eco-friendly mobility. By keeping low GST on EVs, the aim is to promote clean and green transport in India.
Final Thoughts
If you are planning to buy a car in 2025, keep the new GST rates in mind. For budget-friendly options, small cars and EVs remain attractive. However, if you are considering SUVs or luxury cars, be prepared for a higher on-road price due to the increased tax burden.
