Volvo embraces GST 2.0 as luxury car tax cuts boost demand for ICE and EVs
Volvo Car India has welcomed the changes brought by GST 2.0, calling the new tax system simpler for the luxury car market. The updated structure has reshaped pricing for both smaller and larger vehicles, affecting everything from compact models to high-end SUVs. Meanwhile, the company is preparing for a major push into electric vehicles, with a new model set to arrive in 2026.
Under GST 2.0, smaller petrol, LPG, and CNG cars with engines below 1,200 cc, as well as diesel vehicles up to 1,500 cc and under 4,000 mm long, now face an 18% tax rate. Larger vehicles exceeding these limits are taxed at a flat 40%, replacing the previous 28% GST plus cess. This adjustment has made luxury internal combustion engine (ICE) vehicles more competitive, boosting demand for Volvo’s mild-hybrid SUVs.
The refreshed 2025 lineup of Volvo’s ICE models, including the flagship XC90 and XC60, has seen strong sales momentum. Despite this, the company’s electric vehicle (EV) sales have remained steady, with roughly one in four Volvo cars sold being fully electric. The stability in EV demand follows the successful launch of the compact EX30 and temporary adjustments in model availability.
Looking ahead, Volvo remains committed to an all-electric future. The upcoming Volvo EX60, an electric SUV, will lead a more aggressive EV rollout starting in 2026. However, some price adjustments may occur next year due to external factors like currency fluctuations and business conditions.
The introduction of GST 2.0 has streamlined tax rates for luxury cars, benefiting Volvo’s ICE and mild-hybrid models. With the EX60 arriving in 2026 and a stronger focus on electrification, the company continues to balance its current success with long-term sustainability plans. Price changes for certain models may still apply, depending on market conditions.
