Waiting for the perfect time to buy a car? The wait is finally over. September 2025 brought a significant shift with the introduction of GST on Cars in India, marking the implementation of GST 2.0. Overnight, car companies slashed prices on hatchbacks, sedans, SUVs, and hybrids. From Honda to Tata and Hyundai to Maruti Suzuki, everyone adjusted their numbers. For buyers, this means lower prices, simpler loans, and reduced insurance. Whether it’s your first car, a used one, or even a luxury model, there’s no better time to make that move.
What Is GST 2.0?
GST 2.0 is the government’s updated version of the goods and services tax that directly affects automobiles. The aim is simple: boost sales, make cars affordable, and push local manufacturing.
Here’s how it works:
- Small petrol, CNG, and diesel cars (engines up to 1,200cc and under 4 meters long) now have 18% GST on cars in India instead of 28% plus extra cess.
- Larger cars, SUVs, and hybrids are taxed at a flat 40%. Earlier, they were at 43–50% with cess.
- Electric cars remain at a very low 5% GST rate.
This new tax structure has lowered the overall price burden for buyers while simplifying the slabs for companies.
How GST 2.0 Affects Car Prices
The most important part: how much do you actually save? Thanks to GST on cars in India dropping, buyers now get reductions between ₹65,000 and ₹3.5 lakh, depending on the brand and model. On-road prices are generally down by 5–10%.
- Entry-level hatchbacks and compact SUVs show the steepest cuts.
- Mid-size SUVs and sedans also see good drops.
- Large premium vehicles get moderate relief because of cess removal.
This means buyers at every budget level, whether under ₹10 lakhs or above, can find something more affordable than before.
Honda Car Price Cuts
Honda was among the first to react. From September 22, 2025, its most popular cars became cheaper:
- Amaze: ₹95,500 less on the third-gen and ₹72,800 less on the older second-gen.
- Elevate: Savings of up to ₹58,400.
- City Sedan: Almost ₹57,500 down.
Dealers are also adding festive offers, which means buyers can save even more when they walk in for a purchase or claim additional bonuses.
Tata Car Price Cuts
Tata has gone all out, slashing prices across its ICE passenger line-up:
- Tiago: Up to ₹75,000 off.
- Altroz: Up to ₹1,10,000 off.
- Punch: Up to ₹85,000 off.
- Nexon, Harrier, Safari: ₹1.55 lakh lower on some versions.
With these changes, Tata has made its portfolio far more competitive against rivals. For people looking at used car options, this drop may also push down resale values, opening doors for bargain deals in the second-hand car market.
Maruti Suzuki Adjustments
Maruti Suzuki, is also passing GST 2.0 benefits to its customers. Price drops range from ₹36,000 on small hatchbacks to over ₹1.1 lakh on SUVs.
Here’s a quick list of estimated reductions:
- Alto K10: ₹40,000
- WagonR: ₹57,000
- Swift: ₹58,000
- Baleno: ₹60,000
Cars like Dzire and Brezza also fall in this new bracket. Maruti may adjust further based on demand and psychological pricing points.
Hyundai’s Response
Hyundai has surprised everyone by announcing some of the largest reductions:
- Tucson: ₹2.4 lakh off.
- Venue: Up to ₹1.24 lakh down.
- i20, Exter, Aura: Savings between ₹73,808 and ₹98,053.
- Creta, Verna, Alcazar: ₹60,000–₹75,000 cuts.
Hyundai rolled out these changes on September 22, right in time for the festive season sales. It’s big news for families who have been eyeing popular SUVs like Creta or premium models above ₹10 lakhs.
Impact on SUVs and Sedans
The removal of high cess means SUVs and sedans in the ₹15–35 lakh price range now cost much less. Big names like Mahindra XUV700 and Toyota Fortuner see reductions between ₹1–3.5 lakh.
Sedans and hybrids also benefit under the flat 40% GST rate. For buyers who always wondered, “Have car prices dropped in India?” this is the clearest yes. Entry buyers get more value, and luxury shoppers finally see less inflated tags.
Benefit for First-Time Buyers
The biggest winners are people planning their first car purchase. Here’s why:
- Small cars now have lower GST rates, making them easier to buy.
- Loans and EMIs shrink as ex-showroom and on-road costs go down.
- Seasonal discounts and exchange bonuses add extra savings.
With insurance costs also being lower due to reduced vehicle values, the total package of owning a new car is more accessible than before.
Challenges for Car Makers
While GST on cars in India is great for buyers, it creates challenges for companies. Dealers with old stock face losses because only new deliveries fall under updated GST rates.
Profit margins also shrink, forcing companies to find a balance between volume sales and sustainability. In addition, buyers may wait for even more offers, slowing down immediate sales. But in the long run, this reform is expected to strengthen the industry.
GST Rate Comparison: Old vs New
To clearly understand how GST 2.0 changed the market, here’s a side-by-side look at the old rates versus the new GST on cars in India:
| Category | Engine Capacity | Length Consideration | Old GST Rate (incl. Cess) | New GST Rate | Change |
| Small Cars (Petrol/CNG/LPG) | Up to 1200cc | Up to 4000mm | 28% + 1% cess = 29% | 18% | -11% (reduction; more affordable for entry-level models like Maruti Alto, Hyundai Grand i10) |
| Small Cars (Diesel) | Up to 1500cc | Up to 4000mm | 28% + 3% cess = 31% | 18% | -13% (reduction; benefits models like Tata Punch diesel variants) |
| Mid-size/Large Cars (Petrol/CNG/LPG) | Above 1200cc (typically >1500cc) | >4000mm or exceeding small car limits | 28% + 15-20% cess = 43-48% | 40% | -3% to -8% (marginal reduction; e.g., Hyundai Creta, Kia Seltos now at flat 40% without cess) |
| Mid-size/Large Cars (Diesel) | Above 1500cc | >4000mm or exceeding small car limits | 28% + 17-22% cess = 45-50% | 40% | -5% to -10% (relief for models like Mahindra XUV700, Tata Harrier) |
| SUVs/Utility Vehicles (Petrol/CNG/LPG) | Above 1500cc | >4000mm + ground clearance ≥170mm | 28% + 20-22% cess = 48-50% | 40% | -8% to -10% (significant simplification; e.g., Toyota Fortuner, Mahindra Thar now at 40%) |
| SUVs/Utility Vehicles (Diesel) | Above 1500cc | >4000mm + ground clearance ≥170mm | 28% + 22% cess = 50% | 40% | -10% (biggest relief for luxury/large SUVs like BMW X5, Audi Q6) |
Conclusion
GST 2.0 has rewritten the rules for the auto industry. Honda and Tata are no exceptions to Hyundai and Maruti Suzuki, as every major company has reduced prices. Small cars and SUVs are now affordable to first-time buyers, and high-end vehicles such as hybrids and luxury SUVs have lost lakhs of their previous prices.
The shake-up on resale values influences even purchasing used or second-hand cars, even though you are just looking around. Regardless of whether your budget is less than 10 lakh or goes up to a new luxury car, the new GST has changed the scales for you.
In short, the car price drop is not just a headline. It’s a real change that puts more people behind the wheel, making 2025–26 one of the best times to plan a car purchase in India.
For more information on car news, updates, price drop insights, and GST on cars in India, follow My Car Wisdom.
Raja Yadav, the content writer at My Car Wisdom, brings a unique voice and style to our blog. With a knack for storytelling and a keen eye for detail, Raja ensures that every piece of content is informative, engaging, and easy to understand. His focus is on delivering high-quality articles that cater to both novice car owners and seasoned automotive enthusiasts.
