GST on Cars – How to Calculate GST Rates on Motor Vehicles in India

Since the implementation of the GST Act in July 2017, motor vehicles in India have been subject to GST under various slabs, depending on their type, engine capacity, and usage. The applicable GST rates are:

  • 5% GST: Primarily for electric vehicles (EVs) and certain motor accessories.​

  • 12% GST: Applicable to small cars with engine capacities up to 1,200 cc (petrol) and 1,500 cc (diesel).​

  • 18% GST: Levied on mid-size cars and certain used vehicles sold by registered sellers.​

  • 28% GST: Imposed on larger cars, SUVs, and luxury vehicles

Additionally, a Compensation Cess is applied over and above the GST rates for specific vehicle categories.

What is GST? How to Calculate GST on Vehicles?

GST is a tax applicable to different goods and services in India. The GST on cars differs per the car category, and the GST slab rate in India varies from 5% to 28%, as mentioned above. GST applicable on cars depends on different features such as;

  • Car Usage
  • Type of Fuel used
  • Category of Car

The car GST rate depends on different criteria. Before the introduction of GST, excise and VAT were the taxes charged on cars from the consumer. The average rates of the two taxes combined at 26.50% to 44%, were higher than GST at 18% and 28%. Hence, the GST rates in India are low, allowing a lesser tax burden on consumers compared to the earlier taxes. Further, the transport GST rate also supports manufacturers in acquiring auto parts at a lower cost.

The car tax or the GST rate on a motor car varies depending on the vehicle type. For instance, it depends on factors like the car’s fuel type or the engine capacity, etc., while calculating the taxes as per the car’s GST rates. Further, additional charges, such as the applicable cess, are also levied.

GST Imposed on Personal Use Vehicles

When it comes to vehicles purchased for personal usage, like four-wheeler motors, bikes, and bicycles, GST is applied to all of them in varying ranges from 5% to 28%. Also, you may note that GST applied to personal vehicles is not limited to the vehicle itself but the vehicle accessories as well. This also included the parts bought for damage replacement, etc.

The starting GST rate of 5% applies to motorized/non-motorized carriages used by people with disabilities, along with their accessories and replacement parts. This rate was introduced in December 2018 at a GST Council Meeting.

A 12% GST rate, on the other hand, is applied to different categories of vehicles. Below are the vehicle types where the GST rate is 12%.

  • Electric vehicles, including 2-wheeler and 3-wheeler vehicles
  • Fuel cell driven cars such as hydrogen fuel cell technology
  • Non-motorized cycles, including bicycles, delivery tricycles, their accessories, and parts
  • Rickshaws, hand carts, and other hand-propelled vehicles and animal-drawn vehicles

Below are some vehicles where the applicable GST rates are 18%:

  • Vehicles used by people who are physically handicapped (terms and conditions applied)
  • Carriages for babies and their parts for replacement

Here’s a list of vehicles where a 28% GST is applicable:

  • Petrol or diesel vehicles are used for transport or commute purposes. These include station wagons and racing cars of all sizes
  • It also includes two-wheelers with or without sidecars
  • Also, include parts and accessories of two-wheelers/mopeds, including sidecars

What does Compensation Cess mean in the GST Act?

The compensation cess was initiated as a part of the GST Act. It is a charge/tax imposed on some products and is applicable in addition to the GST. Earlier, during the time of VAT, producer states used to collect tax if there was a case of interstate transfer of goods and services.

However, the compensation cess is introduced to compensate the state that produces the goods to support them in incurring any revenue losses caused under the GST regime.

Below are some goods on which the compensation cess is applicable:

  • Vehicles
  • Aerated water
  • Different solid fuel types and coal byproducts
  • Tobacco and tobacco products (VAT is applicable, not GST)

Also, the compensation cess does not apply to products exported to other countries from India as per the current GST Act provisions. In such cases, the compensation cess is returned to the exporter if paid. Compensation cess is not charged to individuals/businesses registered under the composition scheme. Compensation cess was initiated in July 2022 after five years of GST implementation.

What is the GST Compensation Cess on Motor Vehicles?

Besides the GST rates, a compensation cess is also applied that the consumer has to pay while purchasing a vehicle. The table below shows the tax rates on personal use vehicles as per the GST rate list and the Compensation Cess applicable:

Vehicle type GST applicable % Compensation cess applicable % Total tax payable %
CNG/LPG/Petrol vehicles (below 1200cc, less than 4 meters in length) 28 1 29
CNG/Petrol/LPG vehicles (below 1200cc, above the length of 4 meters) 28 15 43
Petrol/CNG/LPG car (1200cc and above, any length) 28 22 50
Diesel car (below 1500cc, below 4 meters length) 28 3 31
Diesel car (below 1500cc, above 4 meters length) 28 20 48
Diesel car (1500cc, 4 meters and above length, 170mm and above ground clearance) 28 22 50
Electric Cars (irrespective of size, 2 and 3-wheelers) 12 Nil 12
Vehicles (used as ambulance) 28 Nil 28
Three-wheeler (motorized vehicles) 28 Nil 28
Fuel Cell Vehicles (hydrogen fuel) 12 Nil 12
Motorcycles/mopeds (up to 350cc) 28 Nil 28
Motorcycles (above 350cc) 28 3 31
Hybrid Passenger Vehicles (1200cc, up to 4m length for petrol vehicles) or (1500cc and up to 4m in length for diesel vehicles) 28 Nil 28
Hydrogen Fuel Cell Vehicles 12 Nil 12

(*Rates applicable are liable to change. The above list is not comprehensive)

GST applicable on Commercial Vehicles

Commercial motors that carry passengers and goods or the ones used in agriculture impose 12 to 28% GST.

Here are some vehicles where 12% GST is applicable:

  • All kinds of tractors (except semi-trailer road tractors above 1800cc engine)
  • Trailers used for agricultural purposes, including self-loading and unloading ones

Here are some vehicles where 18% GST is applicable:

  • Buses that operate on Bio-fuels and are used for transporting public
  • Refrigerated motor vehicles
  • Vehicles used for particular purposes like concrete-mixer lorries, cranes, other lorries, etc.
  • Self-propelled trucks used for goods transport at airports, factories, docks, warehouses, etc.
  • Tractor parts like bumpers, gearbox assembly, clutch assembly, radiator assembly, etc.

Below are some vehicles with 28% GST applicable used for commercial purposes:    

  • Semi-trailer road tractors over 1800cc engine capacity
  • Vehicles used as public transport for 10 or more people (except vehicles powered by bio-fuel)
  • Vehicle used for goods transport (except refrigerated vehicles)
  • Vehicle accessories and repair parts (except tractor parts)

It is important to note that the above list is indicative only and not exhaustive. Also, keep in mind that a GST compensation cess of 15% is applied in addition to the applicable GST in commercial vehicles transporting 13 or more people.

GST Applicable on Used Cars

Initially, when GST was introduced, the GST rate and compensation cess applied on used cars were the same as on new cars. However, the rates were later lowered to boost the used car market. Currently, the GST rate applicable on used cars is 12% for small petrol-run vehicles of over 1200cc and diesel cars with engines of over 1500cc. In the case of engine capacity above 1200cc and 1500cc, as mentioned above, the GST on used cars is 18%.

Used car type GST on used car % Compensation cess on used car % Total applicable tax %
Petrol Car with engine capacity up to 1200cc 12 Nil 12
Petrol Car with engine capacity over 1200cc 18 Nil 18
Diesel Car with engine capacity up to 1500cc 12 Nil 12
Diesel Car with engine capacity over 1500cc 18 Nil 18

*The above list is indicative and subject to periodic change.

GST Rate on Electric Vehicles
An 18% GST rate was applicable on electric vehicles (EVs) and their accessories, like EV chargers, charging stations, etc., at the time of the introduction of GST. However, in April 2019, the rates were reduced to 5% on electric vehicles and their accessories. Henceforth, 5% GST is applicable on all EVs, irrespective of whether they are used for private or commercial purposes.

Conclusion

Author Bio

Paybima Team

Paybima is an Indian insurance aggregator on a mission to make insurance simple for people. Paybima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 21 years of experience. Paybima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

Choose from India’s top insurers

Other Motor Insurance Products

Latest Post

Having a bike is not just about convenience, it’s a huge responsibility. Financial protection of your two-wheeler is important and the best way to ensure that is to have a bike insurance policy that will protect you in case of an accident, theft or a natural calamity. There are so many options when it comes to policies, making it difficult to know what’s best. This guide makes it easier to choose the best bike insurance policy that is suitable for you. 

See nowSee now

Sometimes, we do not pay as much time and heed to car insurance policies as we do for life insurance plans. While this is quite natural, you must know that such a mistake can lead to heavy financial losses.  

Even though people are now changing and more and more individuals have begun opting for car insurance, most people from the upper and lower-middle-class sections in India are not aware of why their insurance premiums vary so much.  

Knowing about such variations and the factors that cause such variations won’t just educate you about premiums. It will also help you address higher premiums and tackle them effectively.  

See nowSee now

Fixed Deposits (FDs) are one of the safest ways to grow your savings. HDFC Bank offers attractive FD interest rates, allowing you to earn guaranteed returns on your investment. But before you invest, it's important to know how much interest you will earn and what your final maturity amount will be.  

See nowSee now

Health insurance plans are purchased with the hope of medical protection in times of need. However, sometimes it ends up being a source of surprise and disappointment. This mostly happens when people rush to buy health insurance plans, often overlooking essential aspects. Ignoring waiting period clauses, misunderstanding exclusions, and being unaware of sub-limits can lead to unwanted problems in the future.

 

See nowSee now

In case of a medical emergency, cashless hospitalization is the best option to avail for anyone. This is only possible if your insurer has a tie-up with some hospitals that are covered under its network and where you can seek treatment without spending a penny. Here we share the list of network hospitals empaneled with Aditya Birla Health Insurance.

See nowSee now