🕒 Last Updated on September 5, 2025, 8:54 PM IST
Buying a car in India involves not just the ex-showroom price but also multiple taxes and charges. One of the most crucial factors influencing car prices is the GST on cars. Since the introduction of the Goods and Services Tax (GST) in July 2017, car buyers and automobile manufacturers have experienced a new tax structure that directly impacts car prices across segments. In this blog, we will break down the GST rates on cars in India, including hatchbacks, sedans, SUVs, and luxury cars, and how it affects your on-road price.
GST Rates on Cars in India 2025
The GST on cars varies depending on the type, size, and fuel category. According to the latest government updates:
- Small Cars (Petrol under 1200cc / Diesel under 1500cc) → 28% GST + 1% or 3% Cess
- Sedans and Mid-size Cars → 28% GST + 15% Cess
- SUVs (Engine >1500cc, Length >4m, Ground Clearance >170mm) → 28% GST + 22% Cess
- Luxury Cars and Premium SUVs → 28% GST + up to 22% Cess
- Electric Cars (EVs) → 5% GST only (No Cess)
This makes electric vehicles the most tax-friendly option in India, as compared to petrol and diesel cars which fall under higher GST slabs.
Impact of GST on Car Prices
The implementation of GST on automobiles replaced multiple taxes like excise duty, VAT, and road tax, creating a uniform tax system. While GST initially lowered prices of some vehicles, the addition of compensation cess on cars has increased the on-road prices of mid-size and luxury cars.
For example:
- A budget hatchback sees a minimal cess impact.
- A luxury sedan or SUV attracts a high cess, making it significantly more expensive.
- Electric cars benefit from reduced GST, promoting eco-friendly mobility in India.
Also Read: Maruti Suzuki Victoris Unveiled – ModiJi
GST on Used Cars in India
The government has also rationalized GST rates on used cars. Currently, used cars attract 12% to 18% GST depending on their category, which has made pre-owned vehicles more affordable compared to new ones.
Conclusion
The GST on cars in India plays a major role in determining the final on-road price of any vehicle. From small hatchbacks to luxury SUVs, GST and compensation cess impact affordability and buying decisions. While petrol and diesel cars attract higher cess, electric vehicles (EVs) enjoy the lowest 5% GST rate, making them the most cost-effective and eco-friendly option. For car buyers in 2025, understanding the GST rates on new and used cars is essential to plan finances wisely and make the best choice in today’s evolving automobile market.
FAQs on GST on Cars
Q1. What is the GST rate on electric cars in India?
The GST rate on EVs is 5% with zero cess.
Q2. Do hybrid cars get GST benefits?
No, hybrid cars are taxed like regular petrol/diesel vehicles with 28% GST + applicable cess.
Q3. Is GST included in the ex-showroom price of cars?
Yes, GST and cess are already included in the ex-showroom price you see at dealerships.
