In a move that could reshape the Indian auto market, the government is planning a major GST reduction on small cars, slashing the tax rate from 28% to 18%. This anticipated change is expected to come into effect by Diwali 2025 and will bring immediate benefits to car buyers across the country.
The lower GST on cars will directly reduce the ex-showroom price, making new car purchases more affordable for Indian consumers. For example, on a car priced at ₹5 lakh, this tax reduction could lead to savings of around ₹50,000. The lower base price also brings down the car loan EMI, potentially saving buyers thousands of rupees over the loan tenure.
This change is aimed at revitalizing demand in the automobile sector, especially in the budget and small car segments. It’s also expected to boost financing activity, as banks and NBFCs anticipate higher loan disbursements driven by increased affordability.
With the festive season approaching, the car GST cut will likely drive a surge in vehicle sales, particularly for popular brands like Maruti Suzuki, Hyundai, and Tata Motors.
This reform is not only a financial relief for consumers but also a strategic push to fuel India’s automotive growth.
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