This diwali is truly a festival for automobile buyers! The indian government is preparing to bring revolutionary changes to the GST system. If this new system is implemented, the prices of cars are likely to come down significantly. Especially the prices of SUVs will come down significantly. Currently, cars are being charged 28% GST along with 1-22% compensation cess. The Center is planning to simplify this system and keep only two tax brackets (5% and 18%). There will be a special tax of 40% on luxury goods and "sin goods" like cigarettes.

According to the new proposals, some important changes will be

Small cars: Cars with engine capacity below 1200cc will now come under the 18% tax bracket. Earlier, complex parameters like vehicle length and ground clearance were taken into account. Now, only engine capacity will be the criterion. The classification of SUVs will be abolished. Although SUVs are currently taxed up to 50%, they can come under the 18% bracket under the new system. This is a huge relief for buyers.
- Electric vehicles (EVs):

The existing 5% GST concession on EVs will continue as is. This decision will help promote electric mobility.

- When will it come into effect?

As prime minister Narendra Modi said in his Independence Day speech, the new GST regime will come into effect by diwali 2025, according to central sources. The Group of Ministers will discuss it on august 21. The GST Council is likely to take a final decision next month.

-Impact on consumers

With these tax cuts, the prices of small cars, especially SUVs, will come down drastically. This is a good opportunity for those who have been hesitant to buy SUVs due to high taxes so far. The automobile industry is also expected to get a boost due to these changes.
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Sowmiya Sriram

19/08/2025 01:12 PM