For prospective buyers who were deferring their new car purchase, this translates into significant price cuts and improved affordability.
04 Sep 2025 | 3199 Views | By Akbar Merchant
Small car and SUV buyers are set to benefit from the Indian government’s latest “next-gen” GST reforms, which introduce a heavily reduced 18 percent GST slab on cars and SUVs measuring under four metres in length and powered by engines smaller than 1,200cc.
This change directly impacts some of ...
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Small car and SUV buyers are set to benefit from the Indian government’s latest “next-gen” GST reforms, which introduce a heavily reduced 18 percent GST slab on cars and SUVs measuring under four metres in length and powered by engines smaller than 1,200cc.
This change directly impacts some of the most popular compact SUVs in the market, such as the Mahindra XUV300 and Tata Nexon, which now qualify for the lower tax rate. For prospective buyers who were deferring their new car purchase, this translates into significant price cuts and improved affordability.
The biggest winners, however, are in the hatchback segment, which continues to dominate Indian passenger car sales. Since most hatchbacks fall within the sub-four-metre and sub-1,200cc category, they are set to benefit across the board. An entry-level hatchback like the Maruti Alto K10 could see price reductions of up to ₹68,000 depending on the variant. Similarly, the Tata Tiago is expected to become cheaper by nearly ₹94,000, while premium hatchbacks such as the Hyundai i20 N Line could see a massive ₹1.38 lakh cut in their final price tags.
While most mass market models under four meters in length will see price cut, there are a few which may see a price hike like the Maruti Brezza—though under four metres long—remains in the “large car” category because of its bigger 1.5-litre engine, pushing it into the much higher 40 percent GST bracket and making it comparatively more expensive.
For new car buyers, these revisions come at an opportune time. With ownership costs already climbing due to rising fuel prices, higher insurance premiums, and increasing loan interest rates, the GST cut makes compact SUVs and hatchbacks far more attractive and is expected to stimulate demand and give a much needed push to sales momentum especially in the Indian small car market.