With the recent rationalization of Goods and Services Tax (GST) rates, leading luxury car manufacturers, including Mercedes-Benz India and BMW Group India, have confirmed that they will fully pass on the benefits to their customers.
Select internal combustion engine (ICE) SUVs and sedans from Mercedes-Benz will see price reductions of up to ₹11 lakh, while BMW models may offer discounts of as much as ₹9 lakh.
In an official statement, Mercedes-Benz India expressed, “In line with our commitment to our customers, we are pleased to share that we will be passing on the entire benefit of the GST reduction directly to the end customers.” They noted that the revised GST for all Mercedes-Benz cars, aside from electric vehicles (EVs), will now be 40%, effective from September 22, 2025, pending the necessary government notifications. The electric models will continue to be taxed at 5% GST.
Focusing on Mercedes-Benz’s luxury SUVs, specific models will experience significant price drops. The GLA 220d 4MATIC AMG Line will see a reduction of ₹3.8 lakh, the GLC 300 4MATIC will drop by ₹5.3 lakh, the GLE 450 4MATIC will be down by ₹8 lakh, and the GLS 450d AMG Line will see a decrease of up to ₹10 lakh.
Previously, luxury ICE cars were subject to a hefty total tax ranging from 48% to 50%, inclusive of a GST of 28% and a compensation cess of 20% to 22%, varying by engine size and vehicle type. However, with this GST update, all luxury ICE vehicles have been shifted to a uniform 40% tax bracket, eliminating the compensation cess. Electric vehicles, however, remain in the 5% GST bracket.
These new GST rates will come into effect on September 22. Numerous automakers, spanning mass-market to luxury segments, have already stated their intentions to pass the complete benefit of these lower taxes on to customers.
In FY25, the luxury car market in India reached a remarkable milestone, with approximately 51,500 units sold, surpassing the cumulative total of 50,000 units for the first time in a fiscal year. Mercedes-Benz led the pack with 18,928 units sold, followed by BMW at 15,266 units and Jaguar Land Rover with 6,183 units.
