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

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.