On Independence Day, PM Narendra Modi had assured a less complex GST structure. Finance Minister soon announced new slabs affecting car purchasers in India directly. With the new rates, hatchbacks and compact cars now come under an 18 per cent GST slab, and luxury cars move to a 40 per cent slab. This move should make hatchbacks and entry-level sedans more affordable while changing prices for top-end models.

Lower Prices for Small Cars Post GST Revision

Previously, customers purchasing hatchbacks and small sedans had to pay 28 per cent GST plus a cess of 17 to 22 per cent. With the 18 per cent slab, small cars are now cheaper by a considerable extent. Cars such as Maruti Suzuki Swift, Wagon R, and Tata Tiago have experienced a significant price fall. For example, the Swift is becoming cheaper by as much as Rs 1.06 lakh, whereas the Wagon R costs approximately Rs 84,000 less for buyers. Hyundai i20 N Line has also gained with a reduction of Rs 1.10 lakh to Rs 1.38 lakh.

Effect on Trendy Hatchbacks and Small Cars

The new GST rates obviously benefit budget buyers. For a consumer who wants a budget-friendly hatchback, the savings are significant enough to make a difference in purchase. Tata Tiago begins at Rs 4.45 lakh, almost Rs 94,000 less than earlier. Due to these reductions, small cars will likely experience more demand in urban as well as semi-urban areas.

How GST Slabs Impact Mid-Size and Larger Cars

It is not just small vehicles. Even mid-size vehicles such as the Maruti Suzuki Dzire are affected positively by the lower GST slab. The cut in price is as much as Rs 60,000, bringing sedans within reach in a segment dominated by compact SUVs. While smaller engine SUVs continue to get the 18 per cent rate, larger powertrain models are charged at a higher slab.

Also Read: Top 5 Electric Scooters in India with Best Range – With 212Km on Full Charge

Also Read:Most Powerful CNG Cars in 2025 Now Offer Up to 31Km Mileage

Luxury Vehicles Fall in New 40 Per Cent GST Band

Mercedes-Benz, BMW, and other luxury cars are now in a 40 per cent GST slab. On the surface, it appears to be an increase in prices from the previous 28 per cent slab. But the government has abolished the cess rate, making the vehicles marginally cheaper than anticipated. For instance, Maruti Suzuki Brezza with the 1.5-litre engine comes under this bracket and currently costs up to Rs 48,000 less.

Purchasers Can Expect Confused Responses within the Market

Affordable models are now easier to reach, and even luxury automakers might gain from cess abolition. Experts think that the new GST framework may strike a balance between affordability and revenue for the government. The change is one of the biggest tax reforms in the auto industry since GST’s rollout, NDTV says.