Revised GST Rates and Their Impact on Car Buyers
Revised GST Rates and Their Impact on Car Buyers
The Indian government, in order to promote consumption and improve economic efficiency, has announced major reforms to the Goods and Services Tax (GST) regime. GST 2.0 abolished the four-tier GST structure that comprised 5%, 12%, 18%, and 28%, reducing it to two core rates of 5% for essentials and 18% for other goods. The government has also introduced a new slab, termed the ‘de-merit’ slab, of 40% and placed sin products and luxury items under it.
But instead of detailing the sectoral impact, the article will focus on the new GST reforms on four-wheelers.
Understanding the Revised GST Rates on Four-Wheelers
Recently, the government under GST 2.0 has overhauled the 28% taxation structure applicable to four-wheelers. This resulted in a reduction in car prices across categories. Effective September 22, 2025, small cars with 1200 cc petrol engines, 1500 cc diesel engines, and a size of under four metres will attract 18% GST. Luxury vehicles and large SUVs were put under the GST slab of 40%.
Not only that, earlier four-wheelers used to attract a compensation cess ranging from 1% to 22%. In this new reform, this has been reduced as well.
Here is a tabular presentation of the changes:
| Vehicle Type | Old Tax Rates (GST + Cess) | New GST Rates |
|---|---|---|
| Small Cars under four metres up to 1200 cc petrol engine | 29% (28% GST + 1% cess) | 18.00% |
| Small Cars under four metres up to 1500 cc diesel engine | 31% (28% GST + 3% cess) | 18.00% |
| Luxury Cars and SUVs over four metres and engine displacement size over 1500 cc | Up to 50% (28% GST + up to 22% cess) | 40.00% |
| Electric Vehicles | 5.00% | 5.00% |
| Auto Parts | Varies between 18% and 28% | 18.00% |
| Two-Wheelers up to 350 cc | 28.00% | 18.00% |
Following the GST rate cut, car manufacturers have decided to pass on the full benefits to customers. Here is how much you can save on different car models based on the new rates.
| Tata Cars | |
|---|---|
| Tiago | Up to ₹75,000 |
| Altroz | Up to ₹1,10,000 |
| Tigor | Up to ₹80,000 |
| Punch | Up to ₹85,000 |
| Curvv | Up to ₹65,000 |
| Nexon | Up to ₹1,55,000 |
| Safari | Up to ₹1,45,000 |
| Harrier | Up to ₹1,40,000 |
| Hyundai Cars | |
|---|---|
| Grand i10 Nios | Up to ₹73,808 |
| Exter | Up to ₹89,209 |
| Aura | Up to ₹78,465 |
| Venue | Up to ₹1,23,000 |
| i20 N Line | Up to ₹1,08,000 |
| Venue N Line | Up to ₹1,19,000 |
| i20 | Up to ₹98,053 |
| Creta N Line | Up to ₹71,762 |
| Verna | Up to ₹60,640 |
| Creta | Up to ₹72,145 |
| Alcazar | Up to ₹75,376 |
| Tuscon | Up to ₹2,40,000 |
| Mahindra Cars | |
|---|---|
| Bolero Neo | Up to ₹1,27,000 |
| XUV 3XO (Petrol) | Up to ₹1,40,000 |
| XUV 3XO (Diesel) | Up to ₹1,56,000 |
| THAR RWD (Diesel) | Up to ₹1,35,000 |
| THAR 4WD (Diesel) | Up to ₹1,01,000 |
| Thar Roxx | Up to ₹1,33,000 |
| Scorpio Classic | Up to ₹1,01,000 |
| XUV700 | Up to ₹1,43,000 |
| Scorpio-N | Up to ₹1,45,000 |
| Toyota Cars | |
|---|---|
| Glanza | Up to ₹85,300 |
| Rumion | Up to ₹48,700 |
| Taisor | Up to ₹1,11,000 |
| Hyryder | Up to ₹65,400 |
| Innova Hycross | Up to ₹1,16,000 |
| Innova Crysta | Up to ₹1,81,000 |
| Fortuner | Up to ₹3,49,000 |
| Vellfire | Up to ₹2,78,000 |
| Hilux | Up to ₹2,53,000 |
| Camry | Up to ₹1,02,000 |
| Kia Cars | |
|---|---|
| Sonet | Up to ₹1,64,000 |
| Seltos | Up to ₹75,372 |
| Carens | Up to ₹48,513 |
| Syros | Up to ₹1,86,000 |
| Carens Clavis | Up to ₹78,674 |
| Carnival | Up to ₹4,49,000 |
| Renault Cars | |
|---|---|
| Kiger | Up to ₹96,395 |
| Kwid | Up to ₹55,095 |
| Triber | Up to ₹80,195 |
| Skoda Cars | |
|---|---|
| Kodiaq | Up to ₹3,30,000 |
| Slavia | Up to ₹63,000 |
| Kushaq | Up to ₹60,000 |
| MG Cars | |
|---|---|
| Gloster | Up to ₹3,04,000 |
| Astor | Up to ₹54,000 |
| Hector | Up to ₹1,49,000 |
Impact of GST Cut on Car Insurance
car insurance price is directly related to the ex-showroom price, which is inclusive of GST. This means the GST rate cut will also make insurance cheaper. However, it is important to note that the own damage component of car insurance will become more affordable, while the third-party car insurance premium will remain unchanged. The reason is that the premium for third-party liability cover is decided by the Insurance Regulatory and Development Authority of India (IRDAI) and is based on engine displacement size, regardless of the make and model you own.
Beyond pricing, other factors that impact car installation premium are:
Geographical Location
If you live in a metropolitan city with dense traffic, frequent accidents, and high car theft cases, you may have to pay a higher premium due to the risk involved. Remember that insurers maintain detailed up to date regional data on accident statistics, claim ratios, and theft reports, which they use to calculate the premium.
Type of Fuel Used
The fuel type of your car influences both repair costs and risks. Diesel cars generally attract higher premiums compared to petrol cars since their engines are more expensive to repair. CNG and LPG vehicles, if fitted externally, may also increase the premium because of additional fire and explosion risks.
Add-On Covers
Add-on covers in car insurance are optional benefits you can purchase along with your comprehensive policy for extra protection. Available on additional premium, depending upon your needs, you can pick from zero depreciation, engine protection, roadside assistance, and/or return-to-invoice cover.
Safety Devices
Cars fitted with advanced braking systems, airbags, and GPS-enabled anti-theft devices are less likely to suffer severe damage or theft. Insurance companies recognise this lower risk and usually provide discounts on premiums. However, discount benefits are available only if the device is recognised by the Automotive Research Association of India (ARAI).
Voluntary Deductible
A voluntary deductible is the part of the claim amount you agree to pay from your own pocket before the insurer contributes. If you opt for a higher deductible, your insurer’s liability decreases, leading to lower premiums. However, this also means you bear more expenses during an actual claim.
Conclusion
The GST overhaul, effective from September 22, 2025, has restructured taxation on cars into just two practical slabs: 18% for small cars and 40% for larger luxury vehicles, while preserving a 5% rate for EVs. With cess removed entirely, price reductions are tangible across segments.
If you are looking to buy a small car in the coming months, you stand to gain the most in percentage terms, while luxury car buyers will see modest savings.
The GST reduction will not only make four-wheelers affordable but also reduce car insurance premiums. The rate slash is expected to encourage car owners to secure their vehicles against incidents like theft, fire, natural disasters, or accidents by investing in comprehensive car insurance.
Health Insurance 
Travel Insurance 
Car Insurance 
Cyber Insurance 
Critical Illness Insurance
Pet Insurance
Bike/Two Wheeler Insurance 
Home Insurance 
Third Party Vehicle Ins. 
Tractor Insurance 
Goods Carrying Vehicle Ins. 
Passenger Carrying Vehicle Ins. 
Compulsory Personal Accident Insurance 
Travel Insurance 
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