From 22 September 2025, the GST on cars moved to two main rates. Small cars, meaning petrol cars under 1,200 cc and diesel cars under 1,500 cc that are under four metres long, now pay 18%. Bigger cars pay 40%. The separate compensation cess that used to sit on top was removed.
Small cars got the biggest cut
Hatchbacks
Most hatchbacks under four metres — Swift, Punch, Altroz — moved from ~29% to 18% GST. Prices dropped ₹30,000 to ₹80,000 depending on the variant.
Compact SUVs
Sub-four-metre SUVs like Nexon and Brezza also qualify for the 18% rate if their engine is under the threshold. Buyers in this segment benefited the most in absolute rupee terms.
Large cars and SUVs also paid a little less
Large SUVs used to pay 28% GST plus up to 22% cess, close to 50% in total. The flat 40% rate is lower, so even big cars saw a modest price cut.
What it means when you buy
- GST is already inside the ex-showroom price, so you never pay it separately.
- Road tax is charged on the ex-showroom price, so a lower ex-showroom price also lowers your road tax.
- Electric cars stay at 5% GST.