Under the new GST 2.0 regime, the tax rate on electric vehicles remains unchanged at 5%. While this ensures EV prices do not increase, it also means no reduction
in costs for buyers. The new regime, effective September 22, 2025, introduces significant changes for ICE vehicles. Cars under 4,000 mm in length with petrol engines below 1,200 cc or diesel engines below 1,500 cc are now taxed at 18%, down from the earlier 28% GST plus 1–3% cess. Larger cars and SUVs, previously subject to a combined 45-50% levy, are now taxed at 40%. Both categories see a price reduction, with automakers already announcing revised rates. Compact cars benefit the most from this shift. For instance, the Tata Nexon has received a maximum price cut of Rs 1.55 lakh. The Hyundai Creta, positioned in the midsize SUV segment, will be cheaper by up to Rs 72,145. Similar updates are expected across the passenger car market as brands roll out updated price lists. However, the unchanged 5% GST rate on EVs creates a widening gap between electric and ICE models. With ICE prices falling and EVs holding steady, affordability tilts further in favour of conventional vehicles. Also Read: Renault Kiger, Triber & Kwid Prices Drop By Up To Rs 96,000 – GST 2.0 Rates Here For instance, the Tata Nexon’s ICE variants were priced between Rs 7.99 lakh and Rs 15.39 lakh (excluding special editions) before GST 2.0 and will move lower with the revised tax structure. In contrast, the Nexon EV remains priced between Rs 12.49 lakh and Rs 16.99 lakh. A similar trend is seen with Hyundai, where the Creta’s ICE range, which falls between Rs 11.10 lakh and Rs 20.14 lakh (excluding special editions), will become more affordable, while the Creta Electric continues to retail between Rs 17.99 lakh and Rs 24.37 lakh. This increased price difference could slow EV adoption in the short term, even as the government maintains its lower GST slab for electric vehicles.
