Defence Force to Benefit More on Purchase of large Cars from CSD

In a significant relief for serving and retired Defence personnel, the Canteen Stores Department (CSD) car rates are poised to benefit substantially from the rollout of GST 2.0 reforms, effective September 22, 2025. Announced at the 56th GST Council meeting on September 3, these changes simplify the tax structure, abolish compensation cess on automobiles, and introduce a two-tier GST slab of 18% and 40% for vehicles, replacing the previous 28% rate plus cess

GST on cars in 2017

Goods and Services Tax (GST) was introduced in 2017, to simplify India’s complicated tax system. The GST for Cars was pegged at a Flat Rate of 28%, plus an additional Compensation Cess, to compensate the revenue loss for states.

Small petrol cars (up to 1200cc and under 4000 M) were levied with Taxes around 29% (GST + Cess)

Small diesel cars (up to 1500cc, under 4000mm) paid around 31% (GST + Cess).

Bigger vehicles, including SUVs and luxury cars are taxed up to 48-50% (GST + Cess).

Rebate in CSD. The Cars purchased through were given a Rebate of 50% of GST only. Hence Defences Personnel were sold cars at 14 % GST Plus 100 % Cess (as applicable). The Defence Personnel Enjoyed no benefits in Cess.

GST 2.0 (Reforms) : Rates and Rebates.

The GST Council Revised the GST and New simpler Slabs were introduced

• 5% for Electric Cars
• 18% for Cars (under 1200cc(P)/1500cc(D) & 4000mm)
• 40% for Luxury Cars (over 1200CC(P)/1500cc(D)and 4000mm)

Now the Rebate on CSD Price for Larger Cars is 50% of GST which translates to 20%. which is a substantial amount.

The Car Dealers/ CSD Depots have not published the CSD Prices of cars after 22 Sep 25. However it is expected to be released in the days to come.

This reform aligns with Prime Minister Narendra Modi’s vision for “ease of living,” as stated in his August 15 address, targeting middle-class aspirations. For defence families, reliant on CSD for affordable essentials, the changes are a boon amid rising inflation. The automotive sector, contributing 7% to GDP, expects a sales surge of 5-7% during the festive season, benefiting manufacturers like Maruti Suzuki and Mahindra.