New car tax in India 2026 follows a two-tax system: GST included in the ex-showroom price by the manufacturer, and road tax paid separately at the RTO based on state slab rates. With GST 2.0 effective April 2026, sub-compact SUVs now attract 18% GST (down from 28%) — a ₹1-3 lakh saving for buyers. Road tax rates remain state-specific, ranging from 4% in Delhi to 18% in Karnataka for premium vehicles.

This guide covers everything you need to know about taxes on new cars in India, from the ex-showroom price to driving your car home.

The Two-Tax System for New Cars

When you purchase a new car in India, two separate taxes apply: GST (set by the central government, included in ex-showroom price) and Road Tax (set by your state government, paid at RTO). Understanding both is essential for accurate budgeting.

GST 2.0 Impact on New Car Prices

GST 2.0 effective April 1, 2026: sub-compact SUVs dropped from 28% to 18%, small cars from 6% to 5%, large SUVs unchanged at 28%, EVs unchanged at 5%. This makes April-June 2026 the best time to buy a sub-compact SUV.

What is the GST rate on new cars from April 2026?

GST 2.0 rates effective April 1, 2026: small cars (under 4m) at 5%, sub-compact SUVs at 18%, large SUVs above ₹15 lakh at 28%, and all electric vehicles at 5%.

What changed in GST 2.0 for new cars?

The biggest change: sub-compact SUVs dropped from 28% to 18% GST — a 10 percentage point reduction. Small cars dropped from 6% to 5%. Large SUVs remained at 28%. EVs were already at 5%.

What is road tax and when is it paid on new cars?

Road tax is a state government tax paid at the RTO after purchasing a new car. It is calculated on the ex-showroom price and is a one-time lifetime payment in most states. Rates vary: Delhi 4-8%, UP 5-10%, Karnataka 8-18%, Maharashtra 6-15%.

How much is RTO registration fee for new cars?

New car registration fees in India: approximately ₹600-1,200 total (Form 20, smart card, number plate, facilitation fee). This is separate from road tax and paid at the RTO before the car is registered.

How does GST 2.0 affect the on-road price of a ₹12 lakh SUV?

A ₹12 lakh sub-compact SUV: Old GST 28% = ₹3,36,000. New GST 18% = ₹2,16,000. Saving: ₹1,20,000. Combined with road tax savings, the new on-road price is significantly lower under GST 2.0.

Official Resources: Parivahan Portal | India GST Portal | NHAI