The Indian automobile sector is once again in the spotlight. The Goods and Services Tax (GST) Council’s 56th meeting on 3 September 2025 brought sweeping reforms to the tax structure. The government introduced a simpler two-tier GST system with slabs at 5% and 18%, reshaping the cost structure for many vehicles.
For car buyers, the most exciting update came from Finance Minister Nirmala Sitharaman’s announcement: taxes on small cars were reduced from 28% GST plus a 1-3% cess to 18%. These include petrol vehicles with up to 1,200cc engines and lengths of up to 4,000mm, and diesel vehicles with up to 1,500cc engines. This shift has made several popular models more budget-friendly, giving a boost to the passenger car market at a time when sales have been sluggish.
At the same time, larger SUVs with engines above 1,500cc and lengths over 4 metres will now attract a uniform 40% GST rate, replacing the earlier 28% GST plus a variable 22% cess. For the middle-class Indian family, though, small cars just became a lot more attractive.
Here’s a look at the top 10 cars that became more affordable in September 2025 after the GST cut.
The Swift has always been a bestseller in India, thanks to its balance of affordability, style, and efficiency. With GST reduced to 18%, this hatchback is now even more value-for-money for young professionals and families alike.
A preferred choice in the compact car segment, the Grand i10 Nios combines smart features with Hyundai’s reliability. The revised GST rate makes it an even stronger competitor against rivals in its category.
Tata Motors’ micro-SUV, the Punch, already popular for its 5-star Global NCAP safety rating, just became more accessible. The GST reform strengthens Tata’s position in the affordable SUV-inspired hatchback space.
For first-time car buyers, the Renault Kwid has always been a practical pick. With GST cuts making it cheaper, its appeal in Tier-2 and Tier-3 cities is bound to rise further.
The Sonet has captured hearts in the compact SUV category. Variants under 1,200cc petrol and 1,500cc diesel engines now fall in the affordable tax bracket, delivering SUV styling at a reduced price tag.
Honda’s compact sedan, known for comfort and efficiency, benefits directly from the GST reform. Families looking for an entry-level sedan now have a more affordable option.
Essentially the premium twin of the Maruti Baleno, the Toyota Glanza is now easier on the pocket. Buyers who want Toyota’s brand trust combined with hatchback practicality will find this reform particularly attractive.
Volkswagen has brought back limited editions of the Polo for enthusiasts. With tax cuts, the Polo offers European driving dynamics at a more approachable cost.
The recently re-launched Skoda Fabia re-enters the Indian market with a sharper design and premium features. Thanks to GST cuts, Skoda’s renewed push in the hatchback segment gains extra momentum.
The Tata Tiago is one of the most popular hatchbacks in the country, thanks to its combination of safety, design, and affordability. With GST benefits, it becomes even more appealing for cost-conscious buyers looking for a dependable everyday car.
These tax reductions come at a crucial time. According to the Society of Indian Automobile Manufacturers (SIAM), passenger vehicle sales dipped in August 2025, while two-wheelers and three-wheelers saw growth. By reducing the prices of small cars, the government aims to reignite demand in this critical segment.
For manufacturers like Hyundai, Kia, Tata, Honda, Toyota, Volkswagen, Skoda, Renault, MG, and Mercedes-Benz, the new GST slabs bring a reshuffling of strategy.
While mass-market brands benefit from stronger affordability, premium SUV makers will need to reposition products because of their uniform 40% GST slab.
Note: The latest announcement removes CESS across all vehicle categories except luxury imported cars, effectively reducing the total tax burden on automobiles. This change is expected to bring down on-road prices and make cars more affordable for Indian households.
While upfront costs have dropped, car ownership is about long-term reliability and running efficiency. That’s where quality batteries make a difference. A car might become cheaper to buy, but if its battery fails often, the overall cost of ownership increases.
This is where Tata Green Batteries adds immense value. Known for their long life, consistent performance, and eco-friendly technology, Tata Green Batteries are designed for Indian driving conditions. Whether you own a hatchback like the Swift, a compact SUV like the Punch, or an EV like the Tiago, a reliable battery ensures your vehicle runs smoothly, especially during extreme weather conditions.
The September 2025 GST reforms have reshaped the small car market in India, making them more accessible to millions of buyers. For urban commuters, first-time buyers, and families, this is the right moment to consider upgrading to a feature-packed yet affordable car.
And when making that decision, remember: the right battery is as important as the right car. With Tata Green Batteries, you don’t just buy a car, you ensure uninterrupted performance and peace of mind on every drive.
Awareness - September 18, 2025
