Luxury Car Buyers Gain as GST Simplified to Flat 40%

The GST Council has rolled out a new GST rate for luxury cars — a flat 40% — replacing the old maze of tax plus cess.

And here’s the twist: even though the slab sounds higher than before, many buyers will actually pay less on‑road. This could well be the best time to buy luxury cars in years.

Mercedes, BMW, or Audi on your shopping list this festive season? The timing just got a whole lot sweeter. This article has more to share.

The GST Council has rolled out a new GST rate for luxury cars — a flat 40% — replacing the old maze of tax plus cess.

And here’s the twist: even though the slab sounds higher than before, many buyers will actually pay less on‑road. This could well be the best time to buy luxury cars in years.

Mercedes, BMW, or Audi on your shopping list this festive season? The timing just got a whole lot sweeter. This article has more to share.

GST on Luxury Cars: What’s Changed

Until now, the luxury tax for cars in India was a two‑part headache — 28% GST plus a hefty compensation cess of 17–22%. That pushed the total tax burden to nearly 48–50% for big‑engine sedans and SUVs.

From September 22, 2025, the government will scrap the cess and slot all qualifying premium vehicles into a single luxury tax slab for cars at 40%. This applies to petrol or hybrid cars above 1,200 cc, diesel or hybrid cars above 1,500 cc, and SUVs meeting the length and ground clearance criteria.

In plain numbers: a ₹40‑lakh luxury sedan that earlier cost about ₹59.2 lakh on‑road will now be closer to ₹56 lakh — that’s savings of over ₹3 lakh.

GST 2.0 for Luxury Cars: Big Win for Buyers?

At first glance, “40%” sounds like a hike. But without the cess, the new GST on cars above 1200 cc actually trims the final price for most high‑end models.

Automakers say this clarity will also help them plan festive season offers, making it the best time to buy luxury cars before 2025 year‑end.

Dealers expect a spike in bookings for flagship sedans, performance SUVs, and even some imported hybrids that now fall under the same flat rate.

GST 2.0 for Cars: Key Points

This move is part of a broader GST overhaul — a simpler two‑slab system of 5% and 18%, with the 40% reserved for “sin” and luxury goods.

Smaller cars have seen their GST drop to 18%, which could boost mass‑market sales. But for the premium segment, the focus is on stability and predictability.

Industry watchers believe the GST on luxury cars will help India’s high‑end auto market grow faster, especially as more global brands bring in electric and hybrid luxury models.

Premium & Luxury Cars Getting Cheaper Under New GST (Effective Sept 22, 2025)

Luxury Cars GST 2.0: Note for Budget-conscious Buyers

If you’ve been waiting for the right moment to get that car you’ve always wanted, this is it.

With the new GST rate for luxury cars locked in, festive discounts around the corner, and inventory ready to move, the math is firmly in your favor.

Just remember — while the tax cut helps, brand offers and dealer negotiations can sweeten the deal even further.

The government’s simplified luxury tax slab for cars is more than just a policy touchup — it’s a green light for aspirational buyers. For once, a tax headline might actually make your wallet smile.