 "From Alto, Creta to Thar: Top cars likely to see price drop under GST 2.0")
GST 2.0 Impact on Car Price: In an effort to streamline the tax system and increase consumer demand, which will ultimately benefit the economy by boosting consumption, the Indian government intends to bring the GST rate on passenger vehicles from the current 28% to a lower band, likely to 18%.
It is anticipated that this move will pave the way for a comeback for small cars, which have historically been the mainstay of the Indian passenger vehicle market but have recently seen slow growth and a declining market share. In summary, the existing GST system for passenger cars is a little complex.
What's GST 2.0?
Prime Minister Narendra Modi declared on August 15, 2025, that the government is working on a revised GST system, officially known as GST 2.0. The government intends to reduce the number of tax slabs and streamline the tax structure under this policy.
Under the proposed tax structure, the majority of items will be moved into only two primary slabs: 5% for basic goods and services and 18% for the majority of other things. The existing GST regime has many slabs, including 5%, 12%, 18%, and 28%. Additionally, a special rate of 40% is proposed for luxury goods.
What is the benefit of the GST 2.0 to the auto industry?
The majority of small and medium-sized cars are anticipated to transition to the 18% slab under GST 2.0, meaning that buyers will pay less in GST for these vehicles. However, a 40% tax rate would apply to luxury cars. Even so, the tax rate on high-end vehicles will be lower than it is under the current regime.
Currently, 28% GST and 1% compensating cess are applied to small gasoline-powered vehicles that are less than 4 meters long and have an engine capacity of up to 1,200 cc. Small diesel vehicles that are less than 4 meters long and have an engine capacity of more than 1,500 cc are subject to 28% GST and 3% cess, for a 31% overall tax incidence.
All cars, with the exception of electric vehicles, have a 28% GST rate; however, the cess rate varies and affects the overall tax incidence. SUVs that are more than 4 meters and have an engine capacity greater than 1,500 cc are subject to a whopping 50% tax rate, which includes 28% GST and 22% cess.
Summary of GST 2.0 to the automobile industry
In summary, the existing GST system for passenger cars is a bit complex. The government wants to make this simpler with the change of the GST rate, which should cut the total upfront cost of all passenger cars in India compared to their existing tax rate. Small vehicles, which have historically formed the foundation of the industry, would gain the most.
The automakers hope that this will attract a large number of prospective first-time car customers who have been hesitant to acquire cars due to the affordability issue. The industry, which has been dealing with slow sales, anticipates a significant increase in sales as a result of GST 2.0.
Top 5 popular cars expected to be ‘cheaper’ in the GST 2.0 tax slab
• Tata Nexon
Nexon is one of the best-selling subcompact SUVs in India, and is regarded as the industry standard for safety. The GST 2.0 is anticipated to result in a significant price drop for this SUV with a variety of powertrain options. It remains to be seen, though, under which tax category the SUV falls into after the rate modification.
• Hyundai Creta
This Hyundai semi-SUV has emerged as the company's main source of revenue in the Indian market since its introduction ten years ago. Its attractive appearance, sophisticated features made possible by cutting-edge technology, variety of powertrain options, and outstanding performance are major factors in its appeal. The Creta is anticipated to benefit greatly from the lower GST rate.
• Mahindra Scorpio N
The Scorpio N is a modern version of the Scorpio emblem that still has the distinctive Scorpio feel, yet has a more upscale appearance and feature set.
With the implementation of the GST 2.0 system, the Scorpio N, which is now priced between ₹13.99 lakh and ₹25.62 lakh (ex-showroom), could see a price reduction of roughly ₹3 lakh.
• Mahindra Thar
The Thar is frequently referred to as the Jeep Wrangler of the poor. The GST rate change is anticipated to result in a significant price drop for the lifestyle SUV, which is regarded as one of India's true-blue off-road vehicles.
However, because the government has not yet disclosed the updated tax structure, the SUV's cost reduction spectrum is still pending.
• Toyota Innova Crysta
The main source of revenue for the Japanese automaker in India is the Toyota Innova Crysta. This big MPV is well-liked by both fleet and private purchasers.
The Toyota Innova Crysta is a very well-liked vehicle in the Indian market because of its comfort, luxury features, and potent powertrain options. It is anticipated that the price of this MPV would drop significantly as a result of the revision to the GST rate.
Top 5 hatchbacks expected to be ‘cheaper’ in the new GST 2.0 tax slab
• Maruti Suzuki Alto K10
The cheapest automobile in India and one of the few remaining hatchbacks with a 1.0-litre petrol engine. Because of its convenience and inexpensive cost of ownership, it is very popular in both the private and taxi sectors.
The revised GST is anticipated to result in a cost decrease for the Alto K10. The price is anticipated to decrease from ₹4.23 lakh (ex-showroom) to roughly ₹3.89 lakh.
• Hyundai Grand i10 Nios
Although the Hyundai Grand i10 is the South Korean carmaker's entry-level hatchback, it promises an upscale feel. This tiny hatchback with a 1.2-litre engine may drop in price from ₹5.98 lakh (ex-showroom) to about ₹5.51 lakh (ex-showroom) with the implementation of GST 2.0.
• Tata Tiago
In the Indian passenger car market, the Tata Tiago is regarded as the safest entry-level hatchback. The hatchback with a 1.2-litre engine boasts a strong build quality, a 4-star safety certification from the Global NCAP, and a number of luxury extras.
Both gasoline-only and gasoline-CNG powertrains are offered. The Tiago is anticipated to be offered at a cheaper starting price of ₹5.15 lakh (ex-showroom) as a result of the GST decrease.
• Maruti Suzuki S-Presso
Shortly after its debut in India, the Maruti Suzuki S-Presso has gained enormous popularity among Indian automobile customers. The 1.0-litre turbocharged engine powers the compact hatchback with a towering SUV attitude.
Many customers in the nation, both in the private and taxi sectors, find it to be a popular, reasonably priced, and useful vehicle due to its modest and compact size and well-proven engine.
• Renault Kwid
The Renault Kwid, the only hatchback from the French automaker in India, is a direct rival of the Maruti Suzuki Alto K10. It helped Renault establish a significant presence in the Indian passenger car industry. The Kwid's sticker price may drop by about ₹40,000 as a result of the revised GST rates.