This Navratri, car buyers in India have another reason to celebrate — the prices of many popular four-wheelers are set to drop following a major change in the GST tax structure. Finance Minister Nirmala Sitharaman has announced reforms that will make cars over 4 metres in length significantly more affordable starting September 22, 2025.
What’s Changing?
Until now, cars over 4 metres attracted 28% GST plus a compensation cess (15%–22%), pushing total taxes as high as 50%. With the new tax rules:
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GST has been raised to 40%
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Compensation cess has been scrapped entirely
This change means the overall tax burden will now be lower than before, despite the higher GST rate, resulting in direct savings for buyers.
Tax Comparison for Different Car Categories
SUVs (Above 4m length, >1500cc engine, >170mm clearance)
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Old: 50% (28% GST + 22% cess)
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New: 40% (40% GST + 0 cess)
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Savings: 10%
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Examples: Mahindra Thar Roxx, XUV700, Scorpio N, Tata Safari, Toyota Fortuner, MG Gloster
Hybrid Cars (Over 4m)
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Old: 43% (28% GST + 15% cess)
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New: 40% (40% GST + 0 cess)
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Savings: 3%
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Examples: Toyota Innova Hycross Hybrid, Honda City Hybrid, Maruti Grand Vitara Hybrid, Toyota Hyryder Hybrid
Cars Over 4m & Up to 1500cc
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Old: 45% (28% GST + 17% cess)
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New: 40% (40% GST + 0 cess)
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Savings: 5%
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Examples: Hyundai Creta, Kia Seltos, Hyundai Verna, VW Virtus, Skoda Slavia, Honda Elevate, Skoda Kushaq, VW Taigun, MG Astor
Extra Benefits for Buyers
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Lower ex-showroom prices: Since compensation cess is gone, the base price will drop.
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Reduced RTO tax: Road tax is calculated on ex-showroom value, so on-road costs will also fall.
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Cheaper auto parts: The GST cut also applies to certain auto components, which could lower production costs.
However, the final benefit depends on whether car manufacturers transfer the entire savings to customers or keep part of it as margin.
Best Time to Buy
With the festive season around the corner, most manufacturers are expected to revise their price lists from September 22, 2025. Buyers planning to purchase vehicles like the Creta, Virtus, Thar Roxx, or Innova Hycross Hybrid should consider waiting until after this date to take full advantage of the tax cuts.
Bottom Line
The GST overhaul is set to bring 3–10% price reductions across different car categories, making this festive season an ideal time for new buyers. Whether you are looking at SUVs, sedans, or hybrids, the new structure promises to make four-wheelers more affordable than before.