GST reform and its impact on cars
India’s biggest indirect tax reform since 2017 has brought cheer to car buyers. On 4 September 2025, the government simplified the GST regime, cutting tax slabs from four (5%, 12%, 18%, 28%) to two (5% and 18%). A new 40% slab now covers luxury cars and tobacco products, while electric vehicles continue at 5%.
Defining small vs. big cars
The GST Council also clarified what qualifies as a “small car.” Any vehicle under 4 metres with petrol engines below 1,200 cc or diesel engines below 1,500 cc falls into the 18% bracket. Cars exceeding either limit, including many SUVs and hybrids, are taxed at 40%. This redefinition has directly influenced car pricing strategies.
Maruti Suzuki passes on the benefit
Maruti Suzuki India Ltd., the country’s largest automaker, immediately announced price cuts across its lineup, ensuring customers enjoy the full GST benefit. Entry-level models such as the Alto K10 are now cheaper by up to ₹1,07,600, priced at ₹3,69,900. Popular small cars like the Wagon-R, Swift, Baleno, and Celerio have also seen significant price reductions.
Model-wise new prices
- S-Presso: ₹3,49,900 (down by ₹1,29,600)
- Alto K10: ₹3,69,900 (down by ₹1,07,600)
- Swift: ₹5,78,900 (down by ₹84,600)
- Baleno: ₹5,98,900 (down by ₹86,100)
- Dzire: ₹6,25,600 (down by ₹87,700)
- Fronx: ₹6,84,900 (down by ₹1,12,600)
- Brezza: ₹8,25,900 (down by ₹1,12,700)
- Grand Vitara: ₹10,76,500 (down by ₹1,07,000)
Larger models like the Jimny and Ertiga fall into the 40% slab due to either engine capacity or length, leading to smaller benefits.
A competitive shift ahead
Maruti Suzuki Chairman RC Bhargava has emphasized that GST rationalisation will make Indian products more competitive globally. Lower car prices, combined with rising competition from global players, could boost affordability for Indian consumers and efficiency for automakers.
New launches unaffected
The recently launched Maruti Suzuki Victoris compact SUV, priced between ₹10,49,900 and ₹19,98,900, already factors in the new GST rates. It will be sold through Arena showrooms, strengthening Maruti’s SUV portfolio.
