GST on cars after September 2025: the three rates, the end of cess and what you pay on-road
By Arjun Ramanarayanan, IndiCar · Published 1 November 2026 · Tips
Since 22 September 2025, new cars carry 18%, 40% or 5% GST with no cess on top. This covers which band your car is in, what prices did, and how Maharashtra road tax follows the GST price.
Since 22 September 2025, a new car in India carries one of three GST rates and nothing on top: 18% for small cars, 40% for mid-size and large cars and SUVs, and 5% for electric cars. The 56th GST Council made the change and removed the compensation cess on the same date. The rate on your invoice is now the whole tax.
The new GST rates for cars
There are now three rates, and the cess is gone. Before the change, cars paid two taxes stacked together: 28% GST plus a compensation cess that had applied since GST began in 2017. That cess ran from 1% on small cars to 22% on SUVs.
- Small cars: 18% GST, no cess
- Mid-size and large cars and SUVs: a flat 40% GST, no cess
- Electric cars: 5% GST, no cess, the same rate they paid before
Which band your car falls in
Your car gets 18% only if it clears both the engine limit and the length limit. The engine must be petrol, CNG or LPG up to 1200 cc, or diesel up to 1500 cc. The car must also be under four metres long.
Fail either test and you pay 40%. Large cars, SUVs and luxury vehicles with a bigger engine, a length over four metres or ground clearance of 170 mm or more are in the 40% band. SUVs over 1,500 cc and 4,000 mm with at least 170 mm of ground clearance are there too.
Length alone does not settle it. The Maruti Brezza pays 40%, not 18%, because it is classified as an SUV.
Old tax versus new tax
Small cars gained the most, because they lost both the higher GST rate and the cess.
| Car type | Before 22 September 2025 | From 22 September 2025 |
|---|---|---|
| Small petrol car | 29% (28% GST plus 1% cess) | 18% |
| Small diesel car | 31% (28% GST plus 3% cess) | 18% |
| Large cars and SUVs | Up to 50% (28% GST plus up to 22% cess) | 40% |
| Electric cars | 5% | 5% |
Because electric cars stayed at 5%, their tax lead over a small petrol car shrank from 24 percentage points to 13. That is still a sizeable gap at the point of purchase. It covers only the tax you pay when you buy, so weigh running costs separately before you pick a fuel.
What the cut did to listed prices
The figures below come from different sources and are not directly comparable. The Alto K10 and Swift figures are reported price changes, while the Brezza, Creta and XUV700 percentages are Nomura estimates. The Brezza and Creta rupee figures are reported listings.
| Model | Reported change |
|---|---|
| Maruti Alto K10 | Now starts from Rs 3.70 lakh, up to 19.94% cheaper |
| Maruti Swift LXI 1.2L MT | Rs 6.49 lakh to Rs 5.79 lakh |
| Maruti Brezza | Rs 75,010 lower; Nomura estimate 3.5% |
| Hyundai Creta | Rs 72,145 lower; Nomura estimate 3.5% |
| Mahindra XUV700 | Nomura estimate 5.5% |
The Brezza pays 40% GST, yet its listed price is reported lower. These are reported figures and estimates, not maker-confirmed lists, so check the actual price for your variant.
Maharashtra road tax follows the GST price
The GST cut lowers your road tax in rupees, but it does not change the road tax rate. Road tax is charged as a percentage of the ex-showroom price including GST, so a smaller GST bill shrinks the amount it is charged on. The rates come from the Maharashtra Motor Vehicle Tax (Amendment) Act, 2025, in force since 1 July 2025.
| Fuel (individual owner) | Under Rs 10 lakh | Rs 10-20 lakh | Above Rs 20 lakh |
|---|---|---|---|
| Petrol | 11% | 12% | 13% |
| Diesel | 13% | 14% | 15% |
CNG cars pay 8% below Rs 10 lakh. Imported cars and cars registered in a company's name pay a flat 20%.
Take an Rs 8 lakh petrol car. Road tax is Rs 88,000 plus a Rs 1,760 road safety cess, and the total RTO cost is about Rs 91,310 if you pay in cash. The GST change did not alter registration charges or insurance directly. Your total still falls because the price those charges sit on is lower.
A worked example: the Scorpio N on-road breakup
The cheapest Scorpio N costs Rs 16,54,792 on-road, against an ex-showroom price of Rs 13,69,001. That means Rs 2,85,791 of what you pay sits on top of the GST-inclusive price. The figures are from IndiCar's price list dated 12 October 2026, for the Z2 Petrol Manual 7-seater registered in Mumbai to an individual.
| Item | Amount |
|---|---|
| Ex-showroom price (includes GST) | Rs 13,69,001 |
| RTO registration and road tax (individual) | Rs 1,68,436 |
| Insurance (first-year comprehensive) | Rs 1,02,815 |
| TCS | Rs 13,690 |
| FASTag | Rs 850 |
| On-road price | Rs 16,54,792 |
Road tax and registration make up the largest add-on, followed by insurance. Since road tax is worked out on the ex-showroom figure, a lower ex-showroom price means a lower road tax line.
The Scorpio N is priced in 27 variant and powertrain combinations, across petrol and diesel and manual and automatic gearboxes. The range tops out at the Z8 L 4WD Diesel Automatic 7-seater: Rs 31,30,136 on-road, ex-showroom Rs 25,49,001. The gap from cheapest to dearest is Rs 14,75,344. You can see every combination in the Scorpio N variant prices and configurator.
Reading your invoice after the change
A car invoice should now show one GST line at 18%, 40% or 5%, and no cess line. The GST figure is the complete tax on the car.
- Check that the rate matches the car's band. A Brezza at 40% is correct, because it is classified as an SUV.
- Check that road tax is charged at the slab for your fuel and price.
- Expect TCS and FASTag as separate small lines, as in the Scorpio N breakup above.
IndiCar gives you the written, itemised breakup for your exact variant before you book. To see how GST, road tax and insurance add up for other models, use the on-road price calculator or browse all new cars with on-road prices.
Sources: GST 2.0 at One Year: How the EV Tax Advantage Shrank, Revised GST Rates and Their Impact on Car Buyers, GST on Cars and Vehicles 2026: Rates, HSN Codes, and ITC
Buying a new car through IndiCar
IndiCar arranges new-car purchases in Mumbai, Navi Mumbai and Thane. You book a new car on IndiCar at the on-road price shown on its car page, with the full price breakup: ex-showroom, RTO registration, insurance, TCS and FASTag. You book online with a refundable reservation, and IndiCar sources the car from partner dealer stock and handles the registration, insurance, paperwork and delivery.
You deal only with IndiCar from quote to delivery. Your phone number is never passed to a dealer, and you do not need to take the quote to a showroom to negotiate. See on-road prices and book or get a WhatsApp quote on +91 85916 41004.
Frequently asked questions
What GST rate applies to cars now?
Since 22 September 2025, small cars pay 18%, mid-size and large cars and SUVs pay a flat 40%, and electric cars pay 5%. None of them pay a compensation cess.
Which cars qualify for 18% GST?
Cars under four metres long with a petrol, CNG or LPG engine up to 1200 cc, or a diesel engine up to 1500 cc. A car with a bigger engine, a length over four metres or ground clearance of 170 mm or more pays 40%.
Why does the Brezza pay 40% GST?
The Brezza is classified as an SUV, so it pays 40% rather than 18%. Its price is reported to be lower by Rs 75,010.
Is there still a cess on car invoices?
No. The compensation cess on passenger cars was removed on 22 September 2025. The GST rate on the invoice is now the complete tax.
Did the GST cut change Maharashtra road tax?
The road tax rates did not change. Road tax is charged as a percentage of the ex-showroom price including GST, so a lower GST bill means less road tax in rupees.
How much did the EV tax advantage shrink?
Electric cars stayed at 5%, while a small petrol car's total tax fell from 29% to 18%. The EV's lead narrowed from 24 percentage points to 13. This covers only the tax at purchase, not running costs.
Tags: gst on cars, compensation cess, road tax, maharashtra rto, on road price