Hatchback sales in India witnessed a remarkable resurgence in the final quarter of 2025, largely attributed to significant Goods and Services Tax (GST) reductions that made small cars more affordable. The 56th GST Council meeting, held in early September 2025, approved a reduction in GST for small cars (under 4 meters in length with specific engine capacities) from an effective rate of 29-31% (including cess) to a unified 18%, a change that came into effect on September 22, 2025. This 'GST 2.0' reform translated into noticeable price cuts, with ex-showroom prices for small cars decreasing by approximately 8.5% to 12.5%, or about Rs 62,500 on a Rs 5 lakh car. Such a reduction proved instrumental in reviving demand, particularly among budget-conscious consumers and first-time car buyers, a segment that had been shifting towards SUVs or used cars due to escalating prices of small vehicles. Automotive consultancy firm Jato Dynamics reported a 20% sequential surge in sales volumes for popular hatchbacks like the Maruti Suzuki Alto, Tata Altroz, and Hyundai i20 during the October-December 2025 quarter. This boosted the segment's share in total passenger vehicle sales from 23.5% in the first nine months of 2025 to 24.4% in the last quarter of the year. Industry leaders also confirmed the positive impact. Maruti Suzuki noted a 5% increase in first-time buyers and a 31% expansion in its entry-segment volumes post-GST revision. Tata Motors anticipates modest hatchback volume growth in the second half of fiscal year 2026 due to these price benefits. Rajesh Menon, Director General of the Society of Indian Automobile Manufacturers (SIAM), highlighted that the GST 2.0 reforms provided an immediate and visible boost, leading to improved retail activity across all entry-level segments during the festive season. While the overall calendar year 2025 sales for hatchbacks may have remained flat compared to 2024, the significant rebound in the last quarter signals a promising turnaround for India's small car market.