Luxury Cars and Big SUVs to Get Cheaper - GST 2.0 Impact

Union Finance Minister Nirmala Sitaraman introduced the GST 2.0 reforms with major taxation changes for the automotive industry. While GST for sub-4 meter cars reduced to 18%, the GST slab for the luxury cars and big SUVs is now shifted to 40%. Earlier, it was 28 percent on big cars. Most people think that the luxury cars or even above 4 meter cars will get expensive post GST 2.0 implementation from 22nd September 2025; however, luxury cars are going to get cheaper and the first few examples are Mercedes-Benz E-Class LWB, Tata Safari and Harrier. 

The Government of India has removed the cessation applicable on all cars. This simplified GST rates make luxury models from car manufacturers, including Mercedes, BMW, Audi and others. 

Earlier, the ICE cars were charged a GST rate of up to 28 per cent + a cess  by up to 17-22 per cent. The overall tax ranging somewhere between 45-55 percent, which is now reduced to just a 40 per cent under new GST rate and no cess. The reduction of tax will surely make luxury cars cheaper.

What Luxury Carmakers Saying?

Commenting on the new GST regimes, Santosh Iyer, MD & CEO, Mercedes-Benz India, quoted, "Government listened to the automotive industry's long-standing wish list of rationalising GST rates. This GST revision is a step in the right direction, is progressive and will induce the much-needed impetus by boosting consumption and bringing momentum to the automotive industry, which essentially remains the pulse of the Indian economy. We are thankful to the Government for keeping the GST rate for BEVs unchanged, ensuring faster transition to a decarbonized future."

Mr. Balbir Singh Dhillon, Head of Audi India, said, "We view the GST simplification as a step in the right direction – one that supports industry growth and helps us expand the market. It also enhances transparency and aligns with India's economic vision. The GST Council's move to retain a low rate for EVs is a welcome step; this brings much-needed clarity and makes our portfolio more accessible to our discerning buyers. Such reforms help stabilize the business environment and help devise strategies that benefit all stakeholders in the best possible manner."