The Central Government has unveiled a revamped GST framework, effective from September 22, 2025, introducing two primary tax slabs of 5% and 18%, alongside a 40% rate for luxury and "sin" goods. This reform is poised to reshape the automobile industry, with anticipated price reductions for luxury cars and SUVs, despite their classification under the 40% tax slab.Mahindra's 'Batman Edition' BE 6 Electric Car Concept Creates a Sensation.!
Currently, luxury cars and SUVs are subject to a 28% GST plus a 17-22% compensation cess, resulting in a total tax burden of 45-50%. For example, a luxury car with an ex-showroom price of ₹40 lakh incurs ₹19.2 lakh in taxes pushing the final price to ₹59.2 lakh. Under the new system, the compensation cess is eliminated, and a flat 40% GST will apply. For the same ₹40 lakh car, taxes will drop to ₹16 lakh, reducing the final price to ₹56 lakh, saving approximately ₹3 lakh.
Luxury Cars and SUVs:
Premium models like Mercedes-Benz, BMW, Audi Q7, and Land Rover Defender will fall under the 40% GST slab, benefiting from the removal of the cess, which will slightly lower their prices.
Small Cars: Vehicles with petrol engines below 1200cc, diesel engines below 1500cc, and lengths under 4 meters will see GST reduced from 28% to 18%, leading to an expected price drop of 5-7%.
Electric Vehicles: EVs will retain their 5% GST rate with no cess, aligning with the government’s push for eco-friendly mobility.Indian Stock Market Surges on August 18, 2025, Driven by GST Reforms and S&P Rating Upgrade..!
This tax simplification aims to make vehicle purchases more affordable, particularly during the festive season, boosting demand. The reduced tax rates for small cars and entry-level two-wheelers offer significant relief to middle-class consumers. While luxury vehicles will see marginal price reductions due to the removal of the cess, the 40% GST ensures they remain premium. Overall, the lower tax burden is expected to invigorate the automobile industry.GST 2.0 Blueprint Released: Simplified Tax Structure with 5% and 18% Slabs, What's there in New Plan Proposal?