GST Applicability & Tax Rates on Automobile
GST Applicability & Tax Rates on Automobiles in India
The automobile sector in India plays a vital role in the economy, contributing significantly to GDP and employment. With the introduction of the Goods and Services Tax (GST) regime in July 2017, the taxation landscape for the automobile industry underwent a major overhaul. In this article, we explore the current GST applicability, tax rates, and compliance aspects related to automobiles in India.
🚗 GST on Automobiles: Overview
Under the GST regime, automobiles are treated as luxury goods and attract one of the highest tax rates. GST replaced multiple taxes such as excise duty, VAT, and road tax, creating a unified structure. However, to compensate for potential revenue losses due to the removal of state-level levies, a Compensation Cess is levied on top of the standard GST.
📊 GST Rates on Different Categories of Automobiles
The GST rate on automobiles largely depends on the type, engine capacity, and length of the vehicle. Here’s a breakdown:
| Vehicle Type |
GST Rate |
Compensation Cess |
Total Effective Tax |
| Small Cars (Petrol <1200cc) |
28% |
1% |
29% |
| Small Cars (Diesel <1500cc) |
28% |
3% |
31% |
| Mid-size Cars |
28% |
15% |
43% |
| SUVs (length >4m, engine >1500cc, GC ≥170mm) |
28% |
22% |
50% |
| Two-Wheelers (<350cc) |
28% |
None |
28% |
| Two-Wheelers (>350cc) |
28% |
3% |
31% |
| Electric Vehicles (EVs) |
5% |
None |
5% |
| Ambulances |
12% |
None |
12% |
| Tractors (<1800cc engine capacity) |
12% |
None |
12% |
| Buses (capacity >13 passengers) |
28% |
None |
28% |
🔁 GST on Used Vehicles
The GST Council has provided concessional rates for used vehicles to promote the resale market:
| Type of Used Vehicle |
Applicable GST Rate |
| Small Cars and Bikes |
12% |
| Other Vehicles (Passenger/Cars) |
18% |
🧾 Input Tax Credit (ITC) on Automobiles
Generally, ITC on vehicles is not allowed, unless:
-
The vehicle is used for resale (car dealership),
-
Transportation of passengers (e.g., taxis),
-
Imparting training on driving such vehicles.
🛻 GST on Leasing of Automobiles
✅ Other Important Points
Electric Vehicles (EVs): Attract only 5% GST, with no cess — making them a tax-friendly and eco-conscious choice.
-
Road Tax & Registration Charges: Levied by state governments, not covered under GST.
-
Imported Vehicles: Attract IGST, Basic Customs Duty, and Compensation Cess as applicable.
Understanding the GST structure for automobiles is essential for buyers, dealers, and manufacturers alike. While GST has simplified indirect taxation, the high tax burden on vehicles—especially luxury and mid-segment models—remains a point of debate. On the flip side, favorable rates on EVs and used vehicles show a push toward sustainability and affordability.
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