Overview

• Large SUVs and sedans currently face 28% GST plus a 22% cess (about 50%), and the plan under consideration points to a flat 40% rate for a narrow set of luxury and sin goods.
• Small cars and two‑wheelers are expected to shift from roughly 29% to 18%, while bigger SUVs and sedans would drop to 40%, which would lower on‑road prices if approved.
• State ministers at a rate‑rationalisation meeting pressed for an extra cess on top of the 40% band, even as the Centre signals a preference to avoid a new levy once the compensation cess ends.
• Nomura estimates buyers could save about Rs 60,000–80,000 on popular small cars and up to roughly Rs 1.1 lakh on some SUVs, with EMIs falling (for example, Dzire to ~Rs 14,195 from ~Rs 15,519).
• Officials and industry observers note the cuts would narrow the tax gap with EVs taxed at 5% and caution that automakers may not pass on the full benefit, though pricing pressure is expected.