India is home to one of the world's largest automobile industries. The industry is growing at a robust pace, contributing majorly to the country’s GDP. It also employs millions of people, making it a hub of job opportunities. The industry’s massive development is a major reason why 15% of India’s GST is allocated to it. The implementation of GST on cars, in particular, has benefited various sectors. However, staying up to date with the latest rates and exemptions can be a task. This blog acts as your one-stop source for all the information related to GST on cars and more. Scroll down to start reading.
Table of contents
Impact of GST on Cars
Before we move on to learn the latest car GST rate, it's important to understand its impact across different segments.
Customers were previously paying both VAT and excise tax on the purchase of vehicles in India. The consolidated rate, on average, used to be somewhere between 26% and 44%. With the execution of GST, the charges and rates charged on cars and bikes have eased. The rates have fallen between 18% and 28%, allowing customers to pay a lower tax on purchases and enjoy savings.
The GST on cars has subsumed prior taxes and thus decreased the overall manufacturing cost. This has benefitted manufacturers greatly and has even enhanced the supply chain mechanism. Additionally, it has allowed manufacturers to obtain automobile parts at a lower cost.
- Importers and Dealers
The GST regime has also benefited dealers and importers by allowing them to claim an input tax credit, which wasn’t possible under the old taxation system. While IGST (Integrated Goods and Services Tax) covers the excise paid on stock transfers, the advance acquired against goods supplies is taxed under GST.
GST Rates on Cars for Personal Use
The GST rate on personal use vehicles, such as cars, motorcycles, and bicycles, ranges from 5% to 12%. This rate is not just applicable to the vehicles but also the parts and accessories attached to them. The minimum GST on vehicles is 5%, applied to carriages for disabled individuals. The same applies to the parts and accessories of the carriages as well.
A 12% GST rate is applicable on vehicles in the following scenarios:
- Electric motor-driven vehicles (this includes 2, 3, and 4 vehicles)
- Fuel cell-driven vehicles like hydrogen fuel cell vehicles
- Non-motorized vehicles like bicycles and others, along with their parts and accessories
- Hand-driven vehicles like hand carts and rickshaws, along with vehicles drawn by vehicles.
An 18% GST on cars and other vehicles is applicable in the following scenarios:
- Cars for individuals who are physically handicapped.
- Carriages for babies and their replacement parts.
A 28% GST is applicable on vehicles in the following scenarios:
- Diesel or petrol vehicles for transport, including station waggons and racing cars, no matter what size.
- Mopeds, motorcycles with (without) sidecars.
- Mopeds, motorcycles, accessories, and parts.
A GST rate of 28% is applicable to private-use cars. However, the compensation cess differs according to engine size and car length. These specifications are listed in 1988’s Motor Vehicle Act.
GST on Commercial Vehicles
Commercial vehicles carry goods and passengers or are used for agricultural purposes. The GST rate levied on these vehicles ranges between 12 and 28%.
12% GST is applicable on commercial vehicles in the following scenarios:
- Tractors but not semi-trailer road tractors with an engine capacity of more than 1800cc.
- Self-unloading or loading trailers for agricultural uses.
18% GST is applicable on commercial vehicles in the following scenarios:
- Buses are used for public transportation and operate mainly on biofuels.
- Refrigerated motor vehicles.
- Special-use vehicles like breakdown lorries, crane lorries, concrete–mixer lorries, etc.,
- Self-driven or propelled vehicles (without any equipment for lifting or handling), such as trucks used for goods transportation over small distances like factories, warehouses, docks, and more.
- Miscellaneous tractor parts that include but are not limited to axle, bumper, radiator assembly, brake assembly, radiator assembly, clutch, etc.
A 28% GST is applicable on commercial vehicles in the following scenarios:
- Semi-trailer road tractors with an engine capacity of more than 1800cc.
- Motor vehicles for transporting ten or more people (doesn’t include biofuel-driven public buses).
- Motor vehicles for goods transportation (doesn’t include refrigerated motor vehicles)
- Miscellaneous accessories and parts (doesn’t include miscellaneous tractor parts)
Used Car GST Rates
Used cars are subject to the same GST as new cars. These rates, however, were decreased to boost the used car market. 12% GST is applicable on pre-owned and small vehicles. This includes petrol cars with up to 1200cc engine capacity and diesel cars with 1500cc engine capacity. GST on cars with more than 1200cc engine capacity (petrol cars) and more than 1500cc engine capacity (diesel cars) is 18%.
The reduction from 28% to 12% has been highly beneficial. The most beneficial of all has been the decrease in compensation cess rates. On January 25, 2018, the compensation cess for used cars, no matter what size, was changed to NIL if no input tax benefit under the CENVAT credit or other taxes is claimed.
|Used Car (Type)||GST on Used Vehicles||Total Tax Applicable||Compensation Cess|
|Petrol Car with up to 1200cc engine capacity||12%||12%||-|
|Diesel Car with up to 1500cc engine capacity||12%||12%||-|
|Petrol Car with more than 1200cc engine capacity||18%||18%||-|
|Diesel Car with more than 1500cc engine capacity over||18%||18%||-|
NOTE: The above list of used car GST rates is subject to change.
GST Rate on Electric Vehicles
The GST rate on electric vehicles, along with their accessories and parts, was set at 18% previously. This rate, however, was reduced to 5% at the 36th GST Council Meeting that took place on July 27, 2019. The change in GST rate on electric vehicles became effective from the 1st of August 2019.
NOTE: The 5% GST on electric vehicles is charged regardless of whether the vehicle is used commercially or privately.
Car GST Rate as per Fuel Type
The GST rate on vehicles can also vary according to fuel and engine type. The table below exhibits these rates.
|Car’s Fuel and Engine Type||Capacity of Fuel Tank||GST Rate|
|Sub 4-meter cars with a petrol engine||Below 1.2 Litres||29%|
|Sub 4-meter cars with a diesel engine||Above 1.21 Litres||31%|
|Sub 4-meter cars with both diesel and petrol engine||Above 1.21 Litres for petrol and Below 1.21 Litres for diesel||43%|
|Greater than 4-metres SUVs cars for diesel and petrol engine||Any capacity||43%|
|Greater than 4-metres non-SUVs for diesel and petrol engine||Above 1.21 Litres for both petrol and diesel cars||43%|
GST Compensation Cess on Cars
At the time of vehicle sales, a compensation cess is applicable in addition to the GST on cars. The following is a table showing the applicable tax rates on vehicles for private use after taking into account the applicable compensation cess and GST*:
|Vehicle Type||Compensation Cess|
|CNG/Petrol/LPG car below 1200cc and length below 4 meters||1%|
|CNG/Petrol/LPG car 1200cc and length exceeding 4 meters||15%|
|CNG/Petrol/LPG car exceeding 1200cc (no matter what length)||22%|
|Diesel car below 1500cc and length below 4 meters||3%|
|Diesel car below 1500cc and length exceeding 4 meters||20%|
|Diesel car exceeding 1500cc engine capacity, ground clearance of 170mm or more and length of more than 4 meters||22%|
|Mopeds/motorcycles with up to 350cc engine capacity||-|
|Mopeds/motorcycles with more than 350cc||3%|
|Electric Cars (for all sizes, including 2, 3, and 4-wheelers)||-|
|Vehicles equipped to be used as ambulances||-|
|3-wheeler motorised vehicles||-|
|Hydrogen fuel cell-driven vehicles and other Fuel-Cell Vehicles||-|
NOTE: The GST Compensation Cess rates above are subject to change.
Going by the above table, it is evident that diesel vehicles with greater engine capacity have more compensation cess and tax rates. Cars with smaller engine capacities, on the other hand, such as electric or fuel-cell vehicles, have less compensation cess.
GST on Cars Exemptions
Car dealers are supposed to pay GST on the difference between the buying and selling price of used cars. But if the difference is negative, they are exempted from paying GST on those cars. Additionally, the government also offers relief from the payment of GST on the purchase of used cars from unregistered dealers.
GST on cars is an important piece of information that one must know before buying a car. Not knowing these rates beforehand could result in unwanted surprises or budget problems. The above blog covers all the details. However, if you still have any questions or concerns in mind,
You May Also Read:
|Goods and Services Tax||GST Returns|
|GST Cancellation||GST State Code|
|GST Return Online||GST Login Portal|
|GST on Laptop||GST E Way Bill|
|GST Refund||GST on Gold|
|GST Portal||GST Rate List|
Frequently Asked Questions (FAQs)
Can GST applied to cars be refunded?
No, as per Section 17-5 of the CGST Act, the GST charged on cars cant be refunded.
Is GST included in the ex-showroom price?
Yes, GST is included in the ex-showroom price of cars.
What is the minimum GST rate applicable on vehicles?
5% is the minimum GST applied to vehicles such as carriages for disabled individuals.
GST is applied to cars based on which categories?
GST on cars is applied based on their usage, fuel type, and segment.
What is the maximum GST rate applicable to cars?
The maximum GST rate applicable on cars is 28%. The engine capacity of these cars is greater than 1500cc.