Hatch, SUV or hybrid? What to pick this Diwali after GST cuts. A first-time buyer's guide

Starting September 22, buying a small car or bike in India is about to get cheaper, while luxury SUVs and hybrids could cost more. The government’s revamped GST structure slashes taxes on compact vehicles but hikes rates on large premium models.

Under the new rules, small cars — defined as petrol engines up to 1200cc, diesel up to 1500cc, and under 4 meters in length — will attract just 18% GST, down from the previous 28%. This is expected to reduce ex-showroom prices by 5–10% for popular models like the Maruti Swift, Hyundai i10, Tata Punch, and compact SUVs like the Brezza and Venue.

In contrast, large SUVs and luxury vehicles — those with engines over 1500cc, length over 4 meters, and ground clearance above 170mm — will now face a flat 40% GST, replacing the old 28% rate plus up to 22% cess. While some models may see negligible changes if the previous total tax matched the new rate, many will likely become more expensive.

Hybrids that exceed small car criteria, like the Toyota Innova Hycross Hybrid, are also pushed into the 40% bracket, narrowing their price gap with traditional ICE vehicles.

Electric vehicles (EVs) remain taxed at just 5%, preserving their status as the most tax-friendly choice.

What it means for buyers:

Small car/compact SUV buyers should act around Diwali, when automakers are expected to offer deep festive discounts on top of the GST cut.

Large SUV and luxury car buyers should brace for higher prices or look for pre-GST deals.

First-time buyers are urged to budget for insurance and registration, and evaluate total ownership costs.

Compact vehicles now offer the best value, especially during the festive season. The new GST regime is a clear nudge toward affordability and mass-market mobility — with premium buyers footing a larger share of the tax bill.