On September 3, 2025, the 56th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, announced a significant overhaul of India’s Goods and Services Tax (GST) structure, introducing a simplified two-slab system for automobiles. This reform, dubbed GST 2.0, has reshaped the automotive industry by reducing tax rates on vehicles, making them more affordable and boosting demand ahead of the festive season. Among the beneficiaries is Mahindra & Mahindra Ltd., India’s leading SUV manufacturer, which swiftly announced price reductions across its Internal Combustion Engine (ICE) SUV portfolio, including its flagship Mahindra XUV700. This article delves into the specifics of the GST rate changes for the XUV700, their impact on pricing, consumer benefits, and the broader implications for Mahindra and the Indian automotive market in 2025.
Background: The GST 2.0 Reform
The GST 2.0 reform, effective from September 22, 2025, streamlined the previous complex tax structure, which combined a base GST rate of 28% with compensation cess ranging from 1% to 22%, resulting in effective tax rates of 29% to 50% for vehicles. The new system establishes two primary GST slabs for automobiles: 18% for smaller vehicles (petrol, LPG, or CNG vehicles up to 1,200 cc and diesel vehicles up to 1,500 cc, with a length not exceeding 4,000 mm) and 40% for larger vehicles (petrol vehicles above 1,200 cc or diesel vehicles above 1,500 cc, exceeding 4,000 mm in length). The removal of the compensation cess, previously as high as 22% for larger SUVs, has significantly lowered the effective tax burden on models like the Mahindra XUV700.
The Mahindra XUV700, a premium mid-size SUV exceeding 4,000 mm in length with engine capacities of 2.0L petrol and 2.2L diesel, falls under the 40% GST slab. Previously, it attracted a total tax rate of up to 48% (28% GST + 20% cess), making the GST 2.0 reduction a substantial relief for both the manufacturer and consumers. Mahindra announced on September 6, 2025, that it would pass on the full GST benefits to customers, effective immediately, rather than waiting for the official implementation date of September 22, 2025.
Mahindra XUV700: Price Reductions Post-GST 2.0
The Mahindra XUV700, launched in 2021, has become one of Mahindra’s most successful models, surpassing 3 lakh sales by August 2025. Known for its premium features, spacious cabin, and powerful engines, it competes with rivals like the Hyundai Creta, Tata Harrier, and Toyota Innova Hycross. The GST 2.0 reform has made the XUV700 significantly more affordable, with price cuts ranging from ₹70,600 to ₹1.44 lakh across its variants, as announced by Mahindra and reported by sources like Moneycontrol and V3Cars.
Here’s a breakdown of the tentative price reductions for key XUV700 variants, effective from September 6, 2025, based on information from V3Cars and CarDekho:
MX1: Reduced by ₹70,600
MX2 Pro: Reduced by ₹93,200
MX3: Reduced by ₹1,00,800
MX3 Pro: Reduced by ₹1,03,300
AX5: Reduced by ₹1,10,400
AX5L: Reduced by ₹1,23,200
REVX: Reduced by ₹1,14,800
AX7: Reduced by ₹1,23,700
AX7L (Top-end, e.g., AX7 Luxury Ebony 4WD 7S Turbo Diesel-Automatic): Reduced by up to ₹1.44 lakh
These reductions translate to an average price drop of approximately 5.72% across variants, with the highest savings on the top-end AX7L variant. For context, the XUV700’s pre-GST 2.0 ex-showroom price ranged from ₹14.49 lakh to ₹25.89 lakh. Post-GST, the starting price could drop to approximately ₹13.52 lakh for petrol variants and ₹13.99 lakh for diesel variants, as estimated by RushLane. These figures are tentative, as Mahindra may adjust pricing to align with market dynamics or psychological price points (e.g., round figures).
The price cuts also reduce associated costs like Road Transport Office (RTO) taxes and insurance, which are calculated based on the ex-showroom price. This makes the on-road price of the XUV700 even more attractive, potentially saving buyers up to ₹1.5–2 lakh overall, depending on the variant and location.
Mahindra’s Strategic Response
Mahindra’s decision to implement price reductions from September 6, 2025, ahead of the official GST 2.0 rollout, reflects its “Customer First” philosophy, as emphasized by Anand Mahindra, Chairman of the Mahindra Group, in a social media post on X: “Action. Not just promises. Thank you, Team @Mahindra_Auto.” This proactive approach distinguishes Mahindra from competitors like Tata Motors and Renault India, which planned to implement price cuts from September 22. By acting early, Mahindra aims to capture festive season demand, particularly during Navratri and Diwali, when automotive sales typically peak.
The XUV700’s price reduction is part of a broader strategy to pass on GST benefits across Mahindra’s ICE SUV portfolio, including models like the Thar, Scorpio-N, Scorpio Classic, XUV3XO, and Bolero. The XUV3XO diesel variant saw the highest reduction of up to ₹1.56 lakh, while the Scorpio-N and Thar Roxx received cuts of up to ₹1.45 lakh and ₹1.33 lakh, respectively. This comprehensive approach reinforces Mahindra’s position as India’s leading SUV manufacturer, with a 15% market share in the SUV segment as of August 2025.
Consumer Benefits and Market Impact
For consumers, the GST 2.0 reform and Mahindra’s immediate price cuts make the XUV700 a more compelling choice in the competitive mid-size SUV segment. The vehicle’s premium features—such as a panoramic sunroof, Level-2 ADAS, dual 10.25-inch screens, and a 12-speaker Sony audio system—combined with savings of up to ₹1.44 lakh, enhance its value proposition. For example, a buyer of the AX7L variant, previously priced at around ₹25.89 lakh, could save nearly ₹1.5 lakh on the ex-showroom price, with additional reductions in RTO and insurance costs.
The timing of the price cuts aligns with India’s festive season, a period when automotive sales surge by 20–30% annually, according to the Society of Indian Automobile Manufacturers (SIAM). Analysts from Crisil Intelligence predict that GST 2.0 will boost sales across the automotive sector, with mid-size SUVs like the XUV700 expected to see a 6.7% price reduction on average. This affordability could attract first-time buyers and middle-income families, further driving demand for Mahindra’s SUVs.
However, some consumers have expressed skepticism on platforms like CarDekho, noting that Mahindra may adjust base prices to offset GST benefits, as seen with the XUV3XO’s AX5 P MT variant, where the ex-showroom price reportedly increased from ₹10.99 lakh to ₹12.49 lakh. Mahindra has clarified that such adjustments reflect strategic pricing to maintain competitive positioning, but the overall savings remain significant.
Competitive Landscape
The GST 2.0 reform has prompted other automakers to announce price reductions, intensifying competition in the SUV market. Tata Motors, for instance, cut prices by up to ₹1.55 lakh on models like the Nexon, while Toyota reduced the Fortuner’s price by ₹2.45–3.49 lakh. Hyundai and Volkswagen also announced cuts for models like the Creta and Virtus, respectively, with reductions ranging from ₹65,000 to ₹1.39 lakh. These moves create a buyer’s market, where consumers can compare value propositions across brands.
The XUV700’s price cuts position it favorably against competitors. For example, the Hyundai Creta, previously taxed at 50% (28% GST + 22% cess), now sees a 10% reduction, bringing its price down by ₹75,000–1.39 lakh. However, the XUV700’s larger size, seven-seat option, and advanced features give it an edge in the premium mid-size segment. Mahindra’s early implementation of price cuts also provides a first-mover advantage, potentially capturing market share before competitors fully roll out their revised pricing.
Broader Industry Implications
The GST 2.0 reform is a game-changer for India’s automotive industry, which contributes 7% to the country’s GDP. By reducing tax rates from 48–50% to 40% for larger SUVs, the government aims to stimulate domestic spending and cushion the economic impact of U.S. tariffs, as noted by Moneycontrol. The reform is expected to boost affordability, particularly for premium SUVs like the XUV700, which appeal to urban and semi-urban buyers seeking feature-rich vehicles.
SIAM President Shailesh Chandra described the reform as a “decisive step” to enhance affordability and inclusivity in India’s mobility ecosystem. Rajesh Jejurikar, ED and CEO of Mahindra’s Auto and Farm Sectors, praised the retention of a 5% GST rate on electric vehicles (EVs), reinforcing India’s clean mobility mission. While the XUV700 is an ICE vehicle, Mahindra’s commitment to EVs, such as the upcoming XUV700 EV facelift spotted in testing, aligns with the industry’s shift toward sustainability.
The reform also reduces the cost of automotive components, with parts like lithium-ion batteries now taxed at 18% (down from 28%) and other components at 5% (down from 12%). This could lower production costs, potentially leading to further price adjustments by Mahindra and other manufacturers in the long term.
Challenges and Considerations
While the GST reduction is a boon, challenges remain. Some consumers, as reported on CarDekho, have expressed frustration over perceived price hikes in certain variants, suggesting that manufacturers may adjust base prices to maintain margins. Mahindra has countered that its pricing reflects market dynamics and variant-specific margins, but transparency in communicating final prices will be crucial to maintaining consumer trust.
Additionally, the automotive industry faces broader challenges, including rising input costs, supply chain disruptions, and fluctuating fuel prices. The XUV700’s mileage, reported at 6–7 km/l by some owners on CarWale, remains a concern for cost-conscious buyers, despite its premium appeal. Mahindra must balance affordability with investments in fuel efficiency and hybrid technology to stay competitive.
Conclusion
The GST 2.0 reform has transformed the affordability of the Mahindra XUV700, with price reductions of up to ₹1.44 lakh making it a standout choice in the mid-size SUV segment. Mahindra’s proactive implementation of these cuts from September 6, 2025, positions it to capitalize on festive season demand and strengthen its market leadership. The reform’s broader impact—lowering tax rates, reducing component costs, and stimulating demand—promises a vibrant future for India’s automotive industry. For consumers, the XUV700’s blend of premium features, spacious design, and newfound affordability makes it an attractive option in 2025. As Mahindra continues to innovate, including with the anticipated XUV700 EV facelift in 2026, the GST 2.0 reform marks a pivotal moment for both the company and its customers, driving value and growth in a dynamic market.
Post a Comment