Cars Getting Cheaper Soon in India GST Reform May Save You Lakhs!

India is preparing for its biggest Goods and Services Tax (GST) reform in 8 years and, for a change, it may be car buyers who will want to celebrate the loudest! Just think, the same hatchback or SUV you’ve been eyeing for some time could now cost thousands – lakhs less as soon as the government gives the green light.

Over the last few years, Indian buyers have wondered why the price of cars , whether you bought a base model affordable hatchback or an expensive SUV  has cost so much because complicated GST slabs plus heavy cesses, lead to total taxes being 29% – 50% of the purchase price alone of the car. That is all about to change.

If the proposals happen as planned, small hatchbacks such as Maruti Alto, Swift, Hyundai i10 could potentially be 8% cheaper, while larger SUVs such as Creta, Seltos, Fortuner could see prices reduce from 3% – 5%. Best of all, it seems likely that the government will introduce this scheme just before Diwali 2025, making this festive time the ultimate moment to purchase your car.

What Is This Proposal About?

This proposal is all about lowering the price of vehicles, and other goods, by changing the rate of GST. Currently vehicles have a complicated tax system, involving high GST and additional cesses. 

This new proposal also aims to change the whole idea behind taxation into simpler systems with minimal slabs and reduce the price on buyers. 

If the GST Council approves the plan it will make small cars up to 8% lower and bigger SUVs 3-5% less expensive for all consumers making vehicles more affordable when the festive season starts.

What’s Changing with GST?

India’s GST reform is about to make life simpler and cars cheaper. Here’s how:

1. Goodbye  to complexity

Currently, GST is categorized into four slabs: 5%, 12%, 18%, 28%, plus additional cesses for certain products. This can be a mess, and hard to follow. The government has proposed simplifying it into just two main slabs: 5% and 18%, and one separate higher slab (40%) for luxury and “sin” goods, such as big SUVs and tobacco.

2. Relief for small  cars

Cars like Maruti Alto, Swift, Hyundai i10, and Tata Tiago which are small hatchbacks currently pay a 28% GST + 1% cess meaning they are expensive. With the new rate, small cars will now be taxed at an 18% flat rate to lower costs by up to 8%. This is good news for middle class buyers.

3. SUVs and luxury vehicles

With the larger vehicles and SUVs like the Hyundai Creta, Kia Seltos, Mahindra XUV700 and Toyota Fortuner now taxed at almost 50% (GST + cess), you will now see a flat 40% without any further cesses under the new law. This means a fall in prices of 3-5%, which could save you anywhere from ₹50,000 to ₹2 lakh depending on the model.

4. Two-wheeled vehicles and daily essentials

It’s not only cars but  two wheelers are also going to be cheaper, as the tax rate is moving from 28% to 18%. Every day goods like soaps and shampoos, and electronics will also shift to the lower bracket, which means households save more.

5. Festival Timing 

The government is suggesting it will roll this out around Diwali 2025, which is India’s peak shopping time. So car buyers may be in line for lower taxes in addition to the usual festive offers and discounts.

6. Market response

Even before the event’s announcement, markets are already buzzing with excitement . The auto index jumped up by nearly 5%, with stocks for car manufacturers like Maruti Suzuki, Hyundai, and Tata Motors all leading the increase. Investors see this as a tremendous development for car sales in the coming months.

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Current vs Proposed GST on Cars

The GST reform doesn’t just look good on paper it could mean big savings for buyers across all segments. From hatchbacks to SUVs, here’s a breakdown:

Category	Current Tax (GST + Cess)	Proposed Tax	Estimated Savings %	Example Models	Approx. Savings in ₹
Small Cars (Hatchbacks)	29%	18%	Up to 8% cheaper	Maruti Alto, Wagon R, Hyundai i10, Tata Tiago	₹40,000 – ₹60,000
Mid-Size Sedans	~43%	40%	3–4% cheaper	Honda City, Hyundai Verna, Skoda Slavia	₹50,000 – ₹80,000
Big Cars & SUVs	~50%	40%	3–5% cheaper	Hyundai Creta, Kia Seltos, Mahindra XUV700, Toyota Fortuner	₹75,000 – ₹2,00,000
Two-Wheelers	28%	18%	~10% cheaper	Hero Splendor, Honda Activa, Bajaj Pulsar	₹5,000 – ₹12,000

Which Cars Will Benefit the Most?

1. Small Cars (up to 1200cc petrol / 1500cc diesel)

• Maruti Alto, Wagon R, Swift
• Hyundai i10, i20
• Tata Punch, Tiago

Most likely to see the greatest price cuts (6–8%) making them financially viable for budget customers.

2. Mid-size Sedans

• Honda City
• Hyundai Verna
• Skoda Slavia

Expect to see 3–4% price cuts.

3. SUVs & Premium Cars

• Hyundai Creta, Kia Seltos, Tata Harrier
• Toyota Fortuner, Mahindra XUV700, Jeep Compass
• BMW X1, Audi Q3

May see 3–5% reduced prices, but it is still useful and financial at higher segments where cuts equate to savings of ₹50,000–₹2 lakh.

Why Is This GST Change A Game Changer? 

1. More affordable Cars 

Families that previously had to believe cars to be too expensive can now consider moving from two-wheeled to small cars. This has enabled many middle-class buyers to consider car ownership without worry. If you’re planning to buy a second-hand vehicle, it’s always smart to do a quick challan check online before purchasing or driving, so you don’t end up with hidden penalties on the vehicle.

2. A Boost for Automakers 

Many car manufacturers, such as Maruti Suzuki, Hyundai, and Tata, who have small car segments have seen demand drop for small cars because of price. With the tax incentives they could open a lot of opportunities for new buyers and drive demand once again. 

3. Festive Season

If they roll out the new GST rates before Diwali 2025, record-breaking sales are a possibility as delivery dates will be key  due to lower prices and festive discounts.

4. Simple tax rules 

 Currently, buyers and car companies struggle with multiplicity of GST slabs, With just two slabs and one luxury tax rate, it is easy and a lot less messy to navigate.

5. Stronger Economy

More car sales lead to more manufacturing in factories, more employment in the auto-sector, and it reflects positively on India’s economy and GDP.

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What’s Next for GST Reform?

• Those changes are not final yet  ; they are still being discussed  by the GST Council that contains the central government and states.
• It’s probable that some states will object because the lower GST rates will equate fewer taxes for them.
• After the council officially gives the green signal, the new tax rates are most likely to be implemented around October–November 2025, just in time for Diwali

Conclusion

If you have put off purchasing a vehicle before, now is the time to be excited. GST reductions will see small cars potentially 8% cheaper and SUVs 3-5% cheaper. It might be easier to update that vehicle now.