Will Car Prices Drop This Diwali? GST 2.0 Could Be the Game-Changer

Diwali has always been the season when car showrooms buzz with offers, discounts, and record sales. Automakers line up new launches and finance schemes, while buyers wait for festive deals. But this year, Diwali 2025, there’s an added twist—India’s biggest indirect tax reform since 2017, GST 2.0, is on the horizon. If approved in time, it could directly make cars cheaper

The GST Overhaul: What’s Changing

The government is working on a major revamp of the Goods and Services Tax (GST) that could bring relief to car buyers

Vehicle Type	Current Total Tax (GST + Cess)	Proposed GST Rate
Small Petrol Cars (under 4m, <1200cc)	29% (28% GST + 1% Cess)	18%
Small Diesel Cars (under 4m, <1500cc)	31% (28% GST + 3% Cess)	18%
Electric Cars	5% (no cess)	5% (no change)
Hybrid Cars	43% (28% GST + 15% Cess)	18% or 40%
Large Cars & SUVs (over 4m, >1500cc)	45–50% (28% GST + up to 22% Cess)	40%

• Small cars (entry-level hatchbacks, compact sedans) may see GST cut from 28% to 18%, slashing ex-showroom prices by 6–12%.
• Large cars and SUVs may move to a 40% special GST slab, keeping their overall tax similar to today’s 43–50%.
• Insurance premiums for health, life, and motor policies could drop from 18% GST to 5% or even zero, making ownership costs lighter.
• The GST structure itself may be simplified to just 5% and 18% slabs, replacing the current 12% and 28% tiers.
These proposals are expected to be taken up by the GST Council in September, with implementation targeted for October—just ahead of Diwali.

How Much Could Car Prices Really Fall?

Analysts estimate:
• Small cars (Maruti Alto, Wagon-R, Tata Tiago, Hyundai Grand i10, etc.) could get cheaper by ₹40,000–₹60,000 depending on the model.
• Mid-size cars may see a smaller dip, roughly 3–5%.
• SUVs and premium cars may not benefit much since their tax rate will stay around the same, but festive offers from manufacturers could still bring savings.
A recent HSBC report suggested the overall auto sector could see an 8% demand boost if GST changes are rolled out before Diwali.

Why Automakers and Dealers Are Excited

Since high GST made entry-level vehicles less appealing, the auto sector has been dealing with slow small-car sales for years. Maruti Suzuki, Hyundai, and Tata Motors may experience new growth in the budget market as a result of a possible tax cut.

Dealers, too, are gearing up. Many are cautiously holding inventory, waiting for the GST Council’s decision before flooding showrooms with festive offers. If the reform gets cleared, expect special Diwali deals stacked on top of tax savings, making it a rare win for buyers.

Impact Beyond Cars

It’s not just cars that could benefit. Two-wheelers, consumer durables like ACs and TVs, and insurance policies are also expected to become cheaper under GST 2.0. That means households could save more across the board during the festive season, boosting consumer confidence.

The Catch: Still a Proposal

While the news is exciting, it’s important to remember that these are proposals. State governments are worried about revenue losses if GST collections fall. The final call lies with the GST Council, which meets in September. If the decision is delayed, the Diwali discounts may not be as big as buyers hope.

Should You Wait to Buy?

If you’re planning a new car purchase, here’s the smart play:
• Small-car buyers: Waiting until October makes sense. The savings could be significant.
• SUV/luxury buyers: Don’t expect much from GST changes, but festive offers will still make Diwali attractive.
• Watch the GST Council meeting: The final word on price cuts will come from there.

Diwali 2025 could be one of the best festive seasons in years for car buyers. With GST 2.0 promising lower taxes on small cars and cheaper insurance premiums, the timing couldn’t be better. If you’ve been holding off on a purchase, keep your eyes on the GST announcements this September. This Diwali, your dream car might finally come with a price tag that feels like a festival gift.