The government has announced a big tax cut on cars under the new GST reform, effective from September 22, 2025. This move will make all cars under 4 metres in length cheaper, especially hatchbacks and compact SUVs.
What Changed Under The New GST Rule?
- GST on small cars (under 4m length) has been reduced from 28% to 18%.
- The compensation cess (1% to 3% earlier) has been completely removed.
- These changes apply to petrol, diesel, CNG, and LPG cars.
Before vs After GST Change
Petrol / CNG / LPG Cars (Up to 1.2L engine)
- Old Tax: 29% (28% GST + 1% cess)
- New Tax: 18% (No cess)
- Savings: 11%
Diesel Cars (Up to 1.5L engine)
- Old Tax: 31% (28% GST + 3% cess)
- New Tax: 18% (No cess)
- Savings: 13%
How Much Can You Save?
- Hatchbacks like Maruti Swift, Hyundai i20, Tata Tiago – up to 11% cheaper.
- Compact SUVs like Tata Punch, Hyundai Exter, Tata Nexon, Mahindra XUV 3XO, Kia Syros – up to 13% cheaper.
- Even slightly bigger models like the Maruti Brezza (1.5L petrol) will see tax drop from 45% to 40%.
Plus, since RTO road tax is calculated on ex-showroom price, you’ll save extra on on-road cost.
You May Also Like to Read this Article - New GST Slabs Reduce Car Prices in India 2025 | Family Car Price Reduce
Will Carmakers Pass On The Full Benefit?
This is the big question. While taxes are slashed, it depends on how much manufacturers actually pass to buyers. Some may reduce prices fully, while others may keep higher margins.
Should You Buy a Car Now or Wait?
- If you are planning a new purchase, the smart move is to wait until September 22.
- After that date, all sub-4m cars will be more affordable.
Buy before next year’s price hike, as carmakers usually increase prices annually.
