Yes, a 40% GST slab was introduced in India, effective from September 2025, as part of the GST 2.0 reforms. This acts as the highest tax rate, applying to specific "sin" goods and luxury items to simplify the tax structure, replacing the previous 28% rate plus additional compensation cess.
The key categories of goods and services included under the special 40% GST slab are, Tobacco and related intoxicants as sin goods (e.g., cigarettes, bidis, pan masala, caffeinated drinks) Drinks with high sugar content and caffeinated. Super-luxury and luxury 4-wheelers, 2-wheelers and personal use yacht, aircraft, ...
The GST rate structure has been simplified into three core slabs: 0%, 5%, and 18%, with a higher 40% rate specifically applied to luxury and sin goods.
The GST Council has approved a new 40% tax slab for sin and luxury goods, set to replace the existing cess. While the implementation date is pending, 5% and 18% slabs take effect from September 22. Finance Minister Nirmala Sitharaman announced the move, highlighting reduced tax burdens for the common person.
Maximum marginal rate is the highest rate of tax at any income level. This means for those with incomes between Rs 2 crore and Rs 5 crore, 39% will be the highest applicable tax rate, and for those with incomes above Rs 5 crore, it will be 42.74% — the highest tax rate since 1992.
India's GST regime is undergoing a landmark transformation with the 56th GST Council meeting unveiling GST 2.0 - next-generation reforms simplifying tax slabs to 5%, 18%, and 40%. Effective from September 22, 2025, these reforms aim to ease compliance, boost consumption, and fuel economic growth.
With the revision in GST rates, the Fortuner is now taxed at 40%. Earlier, the Fortuner attracted a 28% GST and a total compensation cess of 22%, taking the total tax to 50%.
At present, SUVs like the Creta (over 4 metres in length and powered by 1.5-litre petrol and diesel engines) are taxed at 28% GST plus 17% cess, totalling 45%. With the new GST 2.0 rules, the total tax will reduce to a flat 40% GST rate, lowering the ex-showroom prices across the Creta line-up.
In India (from Sep 22, 2025), cars fall into three GST slabs: 5% for EVs and fuel-cell vehicles, 18% for small cars (length ≤ 4,000 mm with engine limits), and 40% for all other cars, as notified by the Government.
Types of GST in India
CGST (Central Goods and Services Tax) SGST (State Goods and Services. IGST (Integrated Goods and Services Tax) UTGST (Union Territory Goods and Services Tax)
In India, the 30% income tax rate generally applies to individuals earning above ₹24 Lakhs (under the old regime/default for some) or ₹15 Lakhs (under the new optional regime for FY 2025-26) and to firms (as a flat rate), while certain income types like lottery winnings, online gaming, and virtual digital assets (like crypto) are taxed at a flat 30% for everyone, regardless of total income.
For any standard-rated supplies of goods or services that you make on or after 1 Jan 2024, you must charge GST at 9%. For instance, if you issue an invoice and receive payments for your supply on or after 1 Jan 2024, you must account for GST at 9%.
How to calculate GST?
GST Rate for Alcohol
Alcoholic drinks would be taxable at 18% GST rate under ethyl alcohol and other spirits, denatured, of any strength. Further, any beverage for which classification is not provided under HSN is also taxed at 18%. Hence, alcohol and alcoholic products would be taxed at 18% GST rate.
Small cars (petrol ≤ 1200cc/diesel ≤ 1500cc, and length ≤ 4000mm), including compact SUVs and hybrids within limits, are taxed at 18%. All larger/higher-end cars and SUVs, including most full-size SUVs are taxed at 40% GST. Electric vehicles stay at a concessional GST rate of 5%.
Common Hyundai Creta disadvantages include potentially underwhelming performance (especially initial pickup and sporty feel), some interior plastics feeling less premium than rivals (like Kia Seltos), fuel efficiency concerns, and occasional reports of minor electronic glitches or build quality issues like rattling/suspension noise, with specific variants missing features like wireless Apple CarPlay or passenger request sensors. The rear middle seat comfort and boot design can also be limiting for three adults or large luggage.
Handy guide on Tata car prices after GST rate revision
The new GST rates reduce taxes on compact petrol and diesel cars to 18%, while larger SUVs and MPVs are taxed at 40%, down from as high as 50%. This means that depending on the model, Tata buyers can now save anywhere between Rs. 65,000 and Rs. 1.55 lakh.
The Mahindra XUV700 falls into the SUV category, where it boasts a length of over 4,000 mm and an engine capacity of over 1,500 cc. Hence, customers are offered savings of 8 percent as it used to command 48 percent GST (28 percent GST + 20 percent cess). The revised tax slab for the XUV700 is a flat 40 percent GST.
The GST rates for the Brezza (sub-4m car with engine capacity of 1,500 cc) have been reduced from 45 percent to 40 percent. The Brezza's revised price range is Rs 8.26 lakh to Rs 12.86 lakh (ex-showroom pan-India).
India's Goods and Services Tax (GST) system has entered a new era with the rollout of GST 2.0, effective from September 22, 2025. The Council has simplified the structure into a 5% slab for essentials, 18% for standard goods, and 40% for luxury/sin items, replacing the earlier complex categories.
Good news is, Starting July 2025, the HST/GST credit has increase by 2.7%, helping low- and modest-income households stretch their budgets. This tax free quarterly payment can put hundreds of extra dollars into your pocket each year.
GST Rate and Slab Changes in September 2025
GST rate cuts on 200 items happened from 22nd September 2025. 90% of items in the current 28% slab are moved to the 18% slab. Almost 99% of the items in the 12% slab are moved to the 5% slab.