GST on Cars
Goods and Services Tax (GST) currently applies to most goods and services in India including motor vehicles. GST on cars in India is applicable across multiple slab rates of 5%, 12%, 18% and 28%. The most relevant GST rate on cars is 28% that applies to motor vehicles including those for personal as well as commercial use. The lowest GST rate on vehicles of 5% applies to carriages for use by disabled people and related accessories. However, GST is not the only tax applicable to motor vehicle sales, as a compensation cess of up to 22% may be levied on cars in addition to the 28% GST that is applicable. Thus the maximum tax rate on cars after GST introduction is as high as 50%.
- 37th GST Council Meeting Update: Compensation cess of 1% and 3% respectively now applicable on 1200cc petrol and 1500cc diesel automobiles of length up to 4000mm with passenger capacity of 10 persons to less than 13 persons.
- 36th GST Council Meeting Update: 5% GST rate applicable to Electric Vehicles (EV) as well as EV accessories such as chargers and charging stations.
GST on Cars for Personal Use
Vehicles for personal use such as motor cars, motor vehicles and even bicycles feature GST ranging from 5% to 12%. The GST on vehicles for personal use is not only applicable to the vehicles itself but also on the accessories/ replacement parts for those vehicles. The lowest GST rate applicable to vehicles is 5% which is applicable to carriages (motorized/non-motorized) for use by disabled persons. The same 5% GST rate also applies to parts/accessories of carriages for use by disabled people. This lower rate was introduced at the 31st GST Council Meeting held in December 2018. The following are some key instances where GST rate on vehicles is 12%:
- Vehicles that are driven by electric motors (including 2 and 3 wheel vehicles)
- Vehicles driven by fuel cells including hydrogen fuel cell technology
- Bicycles and other non-motorized cycles including delivery tricycles as well as their parts and accessories
- Hand propelled vehicles such as rickshaws, hand carts, etc. as well as animal drawn vehicles
The following are some key instances of 18% GST on cars and other vehicles
- Cars for physically handicapped people (subject to specific terms and conditions)
- Baby carriages and its replacement parts
28% GST on cars and other vehicles is applicable in the following cases:
- Motor vehicles (petrol or diesel) for the transport of people including racing cars and station wagons irrespective of size*.
- Motorcycles and mopeds with or without sidecars
- Parts and accessories of motorcycles/moped including sidecars
*GST is applicable at 28% on cars for private use but the compensation cess may differ based on key factors such as the size of the car’s engine and the length of the car. Such specifications are in line with the Motor Vehicle Act, 1988.
Note: The above list is indicative.
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*:
|
Type of Vehicle |
GST Rate |
Compensation Cess |
Total Tax Payable |
|---|---|---|---|
|
Petrol/CNG/LPG car less than 1200cc and length less than 4 meters |
28% |
1% |
29% |
|
Petrol/CNG/LPG car less than 1200cc and length more than 4 meters |
28% |
15% |
43% |
|
Petrol/CNG/LPG car over 1200cc (irrespective of length) |
28% |
22% |
50% |
|
Diesel car less than 1500cc and length less than 4 meters |
28% |
3% |
31% |
|
Diesel car less than 1500cc and length more than 4 meters |
28% |
20% |
48% |
|
Diesel car over 1500cc engine capacity, greater than 4 meters length and ground clearance of 170mm or more |
28% |
22% |
50% |
|
Electric Cars (all sizes including 2 and 3 wheelers) |
12% |
Nil |
12% |
|
Vehicles fitted for use as an ambulance |
28% |
Nil |
28% |
|
Three wheeler motorized vehicles |
28% |
Nil |
28% |
|
Fuel Cell Vehicles including hydrogen fuel cell vehicles |
12% |
Nil |
12% |
|
Motorcycles/mopeds with engine capacity of up to 350cc |
28% |
Nil |
28% |
|
Motorcycles with engine capacity greater than 350cc |
28% |
3% |
31% |
*The vehicle specifications are as per the Motor Vehicle Act, 1988. The rates are liable to periodic change and list is not exhaustive.
From the above list it is clear that diesel vehicles with large engine capacities have the highest compensation cess and by extension the highest tax rates applicable to them. Simultaneously, cars with smaller engines and those driven by cleaner technologies such as electric/fuel cell feature a lower rate of compensation cess.
GST on Commercial Vehicles
Commercial vehicles such as those designed for carrying passengers, goods or for agricultural use typically feature a GST rate ranging from 12% to 28%. The following are some key cases where 12% GST is applicable:
- Tractors except road tractors for semi-trailers with engine capacity exceeding 1800cc
- Self-loading/self-unloading trailers for agricultural purposes
The following are some key examples where GST on cars and other vehicles is applicable at 18%
- Buses for use as public transport that exclusively operate on Bio-fuels
- Refrigerated motor vehicles
- Special purpose vehicles such as crane lorries, breakdown lorries, concrete-mixer lorries, etc.
- Self-propelled work trucks without handling/lifting equipment commonly used for transport of goods over short distances at airports, docks, factories, warehouses, etc.
- Various tractors parts including but not limited to gearbox assembly, axles, brake assembly, bumpers, clutch assembly, radiator assembly etc.
The 28% rate of GST on cars and other vehicles for commercial use is applicable in the following cases
- Road tractors for semi-trailers with engine capacity in excess of 1800cc
- Motor vehicles for transport of 10 people or more (excluding bio-fuel powered public transport buses)
- Motor vehicle for transport of goods (excluding refrigerated motor vehicles)
- Various motor vehicle parts and accessories (excluding various tractor parts)
Note: The above list is indicative.
GST compensation cess of 15% is also applicable over and above applicable GST to commercial vehicles capable of transporting up to 13 people including the driver. This compensation cess is in addition to the GST applicable to the specific vehicle type.
GST on Used Cars
|
Type of Used Car |
GST on Used Vehicle |
Compensation Cess |
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
Originally electric vehicles (EV) and their key accessories such as EV chargers and EV charging stations featured a GST rate of 18%. But, the 36th GST Council meeting held on the 27th July 2019 reduced the GST rate on electric vehicles to 5%. The same 5% GST rate is also applicable to EV chargers and charging stations as announced at the same meeting. This reduced rate is effective from 1st August 2019 onwards. It is important to note that this 5% GST rate will be applicable to all EV irrespective of whether they are for private use or commercial use.
About Us
Hope you enjoyed reading this article. At Falcon eBiz, we continuously work to empower Indian businesses. If you own a business, you can try our super-simple accounting software.
With this software you can create GST bills, track inventory, manage expenses, and even file GST returns. It’s very easy to use and doesn’t require any accounting knowledge.
Know more about our GST ready Accounting software
Know more abour our GST Services