Revised GST Rates for SUVs in India: Understanding New Tax Structure and Abolished Cess
The Indian government recently streamlined automobile taxation, abolishing the compensation cess and consolidating GST rates for passenger vehicles, including SUVs, into two main slabs: 18% and 40%. Electric vehicles maintain a concessional 5% rate. This reform brings greater transparency and predictability to car pricing by categorizing SUVs based on their size and engine capacity to determine the applicable GST.
The latest Goods and Services Tax (GST) adjustments, stemming from the 56th Council meeting in September 2025, have significantly streamlined automobile taxation. Previously, vehicle pricing was complex, involving a base GST along with a varied compensation cess determined by factors such as vehicle size, engine capacity, and fuel type. This often made it challenging to ascertain the total tax applicable to a car.
This previous complexity has now been eliminated. The Council has removed various layers of compensation cess. Passenger cars, including Sport Utility Vehicles (SUVs), are now subject to either 18% or 40% GST, while electric vehicles continue to benefit from a reduced rate of 5%. This simplification, with fewer tax slabs, leads to easier calculations and more transparent car prices.
Defining Sport Utility Vehicles (SUVs)
A Sport Utility Vehicle (SUV) is a vehicle class that combines characteristics of standard passenger cars with those of off-road models, such as elevated ground clearance or four-wheel drive capabilities. India's market features a diverse range of SUVs, from compact city-friendly versions to large, luxurious seven-seater models. Regardless of whether it is a compact SUV designed for urban commutes or a larger model built for highways, each segment now benefits from a clear and consistent GST treatment.
GST Implications for Various SUV Categories
In India, SUVs are classified into several categories based on attributes like size, engine displacement, and specific features. These classifications directly influence the applicable GST rate:
* **Compact SUVs = 18% GST** Vehicles equipped with petrol engines up to 1200cc or diesel engines up to 1500cc, and with an overall length not exceeding 4000mm, fall into this category. Popular examples include models like the Hyundai Venue, Tata Nexon, and Kia Sonet. These affordable options now feature an even more straightforward pricing structure.
* **Larger SUVs = 40% GST** Any SUV surpassing the specified thresholds for engine capacity or vehicle length is subject to this higher tax bracket. This group includes well-known models such as the Hyundai Creta, Mahindra XUV700, Tata Harrier, and Toyota Fortuner.
* **Hybrid SUVs = 18%/40% GST** Hybrid vehicles are taxed similarly to their petrol and diesel counterparts; their specifications determine the rate. Compact hybrid SUVs are taxed at 18%, while larger hybrids attract the 40% rate.
* **Electric SUVs = 5% GST** All fully electric SUVs, irrespective of their dimensions, are taxed at a concessional 5% GST. This lower rate serves as a clear incentive to promote the adoption of environmentally friendly transportation.
India's GST Rates on SUV Vehicles
The following table summarizes the Goods and Services Tax rates applicable to various SUV categories in India:
| SUV Category | Engine Capacity & Length | GST Rate |
|---|---|---|
| Compact SUVs | Petrol | |
| 1200cc, Diesel | ||
| 1500cc, Length | ||
| 4000 mm | 18% | |
| Mid-Size / Large SUVs | Exceeding above engine or length limits | 40% |
| Electric SUVs | Any engine type or length (fully electric) | 5% |
Note: The classification of a car's specifications (engine size, fuel type, length) aligns with the definitions provided in the Motor Vehicles Act, 1988, and its corresponding regulations.
Understanding Changes in Compensation Cess
The elimination of the compensation cess represents a highly significant, yet often underestimated, change. Previously, vehicle prices were increased by a base GST of 28% along with a cess that could reach up to 22%. This cess varied based on the vehicle's classification as a small, mid-sized, or luxury car, as well as its engine type and length. Consequently, larger SUVs often faced combined tax rates approaching 50%, making them considerably less affordable.
Now, the compensation cess has been permanently removed. Vehicles are subject only to two GST slabs: 18% or 40%. This reform enhances relief, transparency, and crucially, predictability in automobile pricing.