New car GST rates 2025 explained — Prices to go down?

The Indian government has brought new reforms to the GST rates for the automotive market, which affects small cars, big cars, two-wheelers, three-wheelers and almost everything related to the automotive landscape at large. Read the story to know more about the new car GST rates 2025 and understand how these reforms are going to affect your purchasing decision.

Small car GST rate 2025 — What’s changed?

The Government of India has revised the GST rate on small cars, bringing a big relief to the first-time car buyers. The earlier GST on small cars has been brought down from 28% to 18%, reducing the tax imposition by 10%. This deduction is valid on cars measuring under 4000mm in length, with engine capacity lower than 1200cc for petrol and 1500cc for diesel. Needless to say, this move is set to boost the India car sales around the festive season as a result of price revisions across segments.

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Mid-sized cars, SUVS GST rate 2025 

If you were in a market for a mid-sized or large-sized car/SUV, there is a small relief as per the new GST rates. Earlier, cars exceeding 4000mm and certain engine sizes were under the 50% tax bracket, including a compensation tax of 22%. Under the new reform, cars measuring above 4000mm in length and having engine capacity exceeding 1500cc will now come under flat 40% tax, thereby reducing the tax imposition by nearly 10%. This move will help to boost car sales in the mass-market as well as luxury segments.

No tax reform for EVs

Under the new amendments for cars, there is no change for GST on EVs. Electric vehicles continue to come under the 5% GST bracket. Needless to say, the lower tax bracket for EVs is further backed by state-level subsidies and relief on road taxes. In recent times, the Maharashtra government announced to exclude electric vehicles from toll taxes, thereby further enhancing the overall ownership experience and motivating prospective buyers to move towards cleaner mobility.

Also Read: Tata Nexon EV with ADAS launch soon — Details inside

New car GST rates 2025 to come into effect from?

The newly-announced GST reforms are set to come to effect from September 22, 2025 onwards. This timeline is set before the upcoming auspicious festive season, thereby motivating the prospective buyers to lock their deals while saving more.

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