The union government recently announcednew GST rates for carswhich has brought down the effective tax payable on all categories of cars. Whilesub-4m cars and SUVs benefit the mostfrom this sweeping tax revision, midsize and large vehicles will a significant drop in prices.
Under the revised GST rates, all combustion vehicles have been categorised under two GST slabs: 18 percent for sub-4m vehicles with petrol engines up to 1,200cc or with diesel engines up to 1,500cc, and 40 percent for all vehicles over 4 metres in length or with petrol engines larger than 1,200cc or with diesel engines larger than 1,500cc. Hybrid vehicles that are over 4 metres in length with 1,200cc petrol or 1,500cc diesel engines also fall under the 40 percent slab. Meanwhile, the GST on EVs remain unchanged at 5 percent.
| Old vs New GST rates for cars | |||
|---|---|---|---|
| Category | Old Rate (GST+cess) | New Rate (GST) | Effective tax reduction |
| Up to 4m, up to 1200cc petrol engine | 29% (28%+1%) | 18% | 11% |
| Up to 4m, up to 1500cc diesel engine | 31% (28%+3%) | 18% | 13% |
| Cars with 1201-1500cc engines | 45% (28%+17%) | 40% | 5% |
| Cars with 1500cc+ engines | 48% (28%+20%) | 40% | 8% |
| 4m+ UVs (170mm GC and above), 1500cc+ | 50% (28%+22%) | 40% | 10% |
| Up to 4m hybrid, up to 1200cc petrol/1500cc diesel engine | 28% (GST only) | 18% | 10% |
| Hybrid with 1200cc+ petrol/1500cc+ diesel engine | 43% (28%+15%) | 40% | 3% |
| Electric vehicles | 5% (GST only) | 5% | - |
What’s interesting to note for midsize and large vehicles is that the GST has actually increased by 12 percentage points, up from the previous 28 percent. However, cess on these vehicles (previously ranging between 15-22 percent) has been eliminated completely, which means the effective tax payable has reduced by 3-10 percentage points, depending on the powertrain and body style.
Midsize SUV and sedan price drops explained
Popular midsize SUVs like the Hyundai Creta, Maruti Grand Vitara and Skoda Kushaq were previously taxed at 50 percent (GST+cess) for measuring over 4 metres in length and with ground clearance of more than 170mm. However, with the new GST rate at 40 percent, these models see an effective tax reduction of 10 percentage points.
Meanwhile, midsize sedans like the Honda City, which were previously taxed at 45 percent with engine capacity between 1,201-1,500cc, will see a 5 percentage point reduction in tax.
Now let’s take a look at how much you could save on these popular cars under the revised GST slab of 40 percent. To calculate the estimated revised prices, we've considered the outgoing GST rate of 28 percent along with additional cess ranging between 15-22 percent. This results in an effective pre-reform GST rate of 43-50 percent, which is included in the ex-showroom price.
We then worked our way backwards to obtain the tax-free pricing for each car, and then applied their respective post-reform GST rates to arrive at the revised ex-showroom prices. Do note, here we have considered only the base and top-end price of each car.
Here’s how the ex-showroom pricing of models like the Hyundai Creta, Maruti Grand Vitara, Skoda Kushaq and Honda City could look once the new GST rates kick in from September 22 onwards:
| Midsize SUVs and sedans GST price cut comparison | |||||
|---|---|---|---|---|---|
| Model | Current price (Rs lakh) | Old Tax | New Tax | Adjusted price (Rs, lakh) | Difference (Rs, lakh) |
| Creta petrol | 11.11-20.76 | 50% (28% GST + 22% cess) | 40 percent | 10.36-19.37 | 0.75-1.39 |
| Creta diesel | 12.69-20.92 | 50% (28% GST + 22% cess) | 40 percent | 11.85-19.53 | 0.84-1.39 |
| Grand Vitara petrol | 11.42-19.64 | 50% (28% GST + 22% cess) | 40 percent | 10.66-18.34 | 0.76-1.30 |
| Grand Vitara hybrid | 16.99-20.52 | 43% (28% GST + 15% cess) | 40 percent | 16.63-20.00 | 0.36-0.52 |
| Kushaq | 10.99-19.09 | 50% (28% GST + 22% cess) | 40 percent | 10.25-17.82 | 0.74-1.27 |
| City petrol | 12.38-16.65 | 45% (28% GST + 17% cess) | 40 percent | 11.95-16.08 | 0.43-0.57 |
| City hybrid | 19.90 | 43% (28% GST + 15% cess) | 40 percent | 19.48 | 0.42 |
As you can see in the table above, midsize petrol and diesel SUVs could see their prices drop in the range of Rs 75,000-1.40 lakh. Meanwhile, non-UV midsize vehicles like the Honda City with lesser drop in effective tax could see prices come down in the range of Rs 40,000-60,000. Hybrids, meanwhile, are expected to benefit the least with about Rs 40,000 in savings.
Large UVs price drop explained
| Large UVs GST price cut comparison | |||||
|---|---|---|---|---|---|
| Model | Current price (Rs, lakh) | Old Tax | New Tax | Adjusted price range (Rs, lakh) | Difference (Rs lakh) |
| Fortuner diesel | 36.73-52.34 | 50% (28% GST + 22% cess) | 40 percent | 34.28-48.85 | 2.45-3.49 |
| XUV700 petrol | 14.49-23.54 | 50% (28% GST + 22% cess) | 40 percent | 13.52-21.97 | 0.97-1.57 |
| XUV700 diesel | 14.99-25.14 | 50% (28% GST + 22% cess) | 40 percent | 13.99-23.46 | 1.0-1.58 |
| Innova Hycross Hybrid | 26.46-32.58 | 43% (28% GST + 15% cess) | 40 percent | 25.90-31.90 | 0.56-0.68 |
| Innova Crysta diesel | 19.99-27.18 | 50% (28% GST + 22% cess) | 40 percent | 18.65-25.36 | 1.34-1.82 |
On larger and more expensive SUVs and MPVs, buyers will be able to make more significant savings because the tax is calculated on a much higher base. Therefore, the drop in prices is also that much more significant, with the likes of the Toyota Fortuner becoming more affordable by over Rs 3 lakh at the top-end. Here, too, hybrids will see a much lesser revision in prices thanks to a reduction of just 3 percentage points.
Do note these revised prices are only indicative, considering manufacturers pass down the entire benefit to the customers. It remains to be seen how much of the GST cut is ultimately passed down to the customer once its effective from September 22, 2025.
Also See:
How much more affordable will sub-350cc bikes and scooters become?
Prices of motorcycles above 350cc calculated with revised GST rates
