Car buyers in India have some good news coming their way this festive season. From September 22, 2025, the government's new GST regulation will reduce the price of every car shorter than four meters in length. The change is straightforward but effective- GST has been reduced from 28% to 18%, and the compensation cess has been eliminated.
Lower taxes for petrol, diesel, and CNG cars
So far, customers have paid almost 29% tax on small petrol, CNG, or LPG cars (1200cc and below) and about 31% on diesel variants (up to 1500cc). With the new structure, all such cars will now be taxed at a flat 18%, providing much relief to those considering hatchbacks and compact SUVs.
On-road prices to decline further
Popular models such as the Maruti Swift, Hyundai i20, Tata Tiago, Tata Punch, and Hyundai Exter will benefit right away. The savings don't end at the ex-showroom price. As registration charges and road tax are tied to the base price, buyers will also see a decline in their overall on-road cost. Moreover, the government has lowered GST on auto parts and components. If manufacturers pass on this benefit, the effective price reduction could be even steeper.
Will automakers pass on the full Benefit?
Automakers might not pass on the full benefit to customers and might use the tax shift to widen profit margins. This means the final benefit will differ brand to brand and only become apparent once new price lists are released.
Expert advice: Wait until after September 22
For anyone looking to buy a car in the next few months, experts suggest waiting until after September 22. The tax reform promises savings across the board, but the biggest benefits will be for small car buyers. Given that manufacturers sometimes raise prices at the start of the year, which could partially offset the gain, it is also wise to act soon once the new rates take effect.
