GST on Cars

Introduction

GST on Cars – The automobile industry in India is one of the country’s largest sectors, manufacturing millions of cars and motorcycles annually. The introduction of the Goods and Services Tax (GST) subsumed various indirect taxes, streamlining the taxation process for automobiles, which has brought both benefits and challenges to the industry.

What is GST on Cars?

GST on cars in India applies to different tax slab rates of 5%, 12%, 18%, and 28%, depending on factors such as:

Classification of the vehicle (small, medium, or luxury)
Fuel type (petrol, diesel, electric)
Usage (personal or commercial)

Understanding how GST affects the cost of cars can help buyers and industry stakeholders make informed decisions.

You may also want to know GST on Transport

GST Rates on Cars in India

The following tables detail the GST rates based on the category and fuel type of cars in India:

GST on Cars Based on Category

Category of Car	Model	Pre-GST Tax Rate	GST Rate on Car
Small cars with an engine capacity less than 1200cc	Volkswagen Polo, Hyundai Grand i10, Maruti Suzuki Swift, and Tata Tiago.	28%	18%
Medium size cars with an engine capacity over 1200cc and less than 1500cc	Honda Amaze, Nissan Kicks, Maruti Baleno, and Tata Nexon.	39%	18%
Luxury car with an engine capacity above 1500cc	Lamborghini Aventador, Bugatti Chiron, Toyota Land Cruiser, Land Rover, etc.	42%	28%
SUVs with an engine capacity above 1500cc	Renault Duster, Mahindra TUV, Jeep Compass, Maruti Vitara Brezza, etc.	45%	28%
Electric vehicles	Mahindra eVerito and Mahindra e20. Electric vehicles owners receive a direct deduction of 7.5%	20.5%	12%

GST on Cars Based on Fuel Type

Fuel and engine type of car	Fuel tank capacity	Model	Pre-GST Tax Rate	GST rate on car
Sub-4-meter cars with an engine for diesel	Less than 1.2l	Maruti Suzuki Dzire, Toyota Etios Liva, Hyundai Grand i10, Volkswagen Polo, etc.	31.5%	29%
Sub-4-meter cars with an engine for both petrol and diesel	Over 1.5l	Mahindra TUV 300, Hyundai i20, Maruti Suzuki Vitara Brezza, Ford Ecosport, etc.	33.25%	31%
Larger than 4-metre SUVs for petrol and diesel engine	For petrol – more than 1.2l For diesel – less than 1.5l	Subcompact SUVs and sedans	44.7%	43%
Larger than 4-metres SUVs for petrol and diesel engine	Any capacity	Tata Hexa, Mahindra Scorpio, Ford Endeavour, Mercedes-Benz GLC, etc.	55%	43%
Larger than 4-metres non-SUVs for petrol and diesel engine type	For petrol – over 1.2l For diesel – over 1.5l	Hatchbacks and sedans	51.6%	43%
Electric cars	Nil	Mahindra e20, Mahindra eVerito, etc.	20.5%	12%

GST Cess on Cars

In addition to GST, an additional cess is imposed on cars based on their category and engine capacity. The cess rates vary from 1% to 15% and are calculated on top of the GST rate.

You may also want to know the Types of GST

Impact of GST on the Automobile Industry

Consumer Impact

Before GST, buyers paid a combination of excise duty and VAT, with combined rates varying between 26.5% to 44%. After GST, rates were reduced from 18% to 28%, resulting in lower taxes on most vehicle purchases, offering cost savings for consumers.

Manufacturer Impact

GST has simplified the supply chain for manufacturers by subsuming older taxes, reducing production costs, and allowing for cheaper procurement of automobile parts. This has improved the overall efficiency of the manufacturing process.

Dealer and Importer Impact

Dealers and importers now benefit from the ability to claim input tax credits (ITC) under GST, which was not possible earlier. The Integrated Goods and Services Tax (IGST) now covers excise taxes on stock transfers, and advance payments for goods are taxed under the GST framework.

GST Calculation on Cars

The final price of a car, including GST, depends on several factors such as the car’s category, engine size, and fuel type. For example:

A Hyundai i20 with a price range of ₹6.49 lakh to ₹8.3 lakh will be taxed as per the GST rates, and applicable cess will be added to determine the final sale price.

Exemptions for GST on Cars

Used Car Dealers

For used cars, GST is levied on the difference between the selling price and the buying price, helping to eliminate the cascading effect of taxation. If the margin is negative, dealers do not have to pay GST. Additionally, the government exempts GST on the purchase of second-hand vehicles from unregistered sellers.

Car Services and Warranties

Car services and warranties provided by dealers are also subject to GST. However, GST emphasizes the consumption state, ensuring balanced growth in the automobile industry.

Should You Invest in a Car Now?

Mid-segment cars are likely to experience an increase in prices, especially in the small diesel car category. However, luxury cars and SUVs may see significant price reductions due to attractive offers. This makes it a potentially opportune time to invest in high-end vehicles.

Conclusion

The introduction of GST has streamlined the tax system in India’s automobile sector, making it more efficient for manufacturers, dealers, and consumers. While tax rates have generally decreased, certain categories like luxury cars and electric vehicles have become more attractive to buyers. Understanding the GST framework and its implications can help consumers and businesses make more informed decisions when buying or selling cars.

Frequently Asked Questions

What is the current GST rate on cars in India?

GST rates on cars vary from 18% to 28%, depending on the car’s category, engine size, and fuel type.

Is there any exemption on GST for used cars?

Yes, used car dealers pay GST only on the difference between the selling and buying prices. Additionally, buying used cars from unregistered sellers is exempt from GST.

Do electric vehicles attract lower GST rates?

Yes, electric vehicles attract a lower GST rate of 12%, compared to traditional petrol and diesel cars.

How is GST calculated on cars?

GST is calculated based on the car’s category, engine capacity, fuel type, and applicable cess.

Does GST affect car servicing and warranties?

Yes, car services and warranties provided by dealers are subject to GST under the current tax regime.

Open Free Demat Account

Related Terms

Explore our feature-rich web trading platform

Get the link to download the App

Learn. Transform. Evolve.