Auto SectorEV @ 5%

GST on Automobiles — Cars, EVs, Two-Wheelers & Cess

Complete guide to GST on automobiles: car taxation with compensation cess (29%-50%), electric vehicles at 5%, two-wheelers, spare parts, used car margin scheme, ITC restrictions, and dealer billing structure.

28%+1%

Small Cars (<4m)

28%+17%

Mid-Size Cars

28%+22%

SUVs (>4m,>1500cc)

5%

Electric Vehicles

28%

Two-Wheelers

28%

Spare Parts

28%

Tyres

12%/18%

Used Cars

GST Framework for Automobiles

Cars & SUVs — 28% + Cess

All motor vehicles (passenger cars, SUVs, luxury cars) attract the highest GST slab of 28% PLUS compensation cess. Cess varies: 1% for small cars (<1200cc, <4m), 3% for small diesel cars (<1500cc, <4m), 17% for mid-size cars, 20% for large cars (>1500cc), and 22% for SUVs (>4m length, >1500cc, ground clearance >170mm).

Electric Vehicles — 5% (No Cess)

In a landmark decision (2019), the GST Council reduced EV rate from 12% to 5% with NO compensation cess. EV chargers also at 5%. This makes India's EV taxation among the lowest globally. Applies to: electric cars, electric buses, e-rickshaws, electric two-wheelers, and hybrid vehicles (only pure EVs qualify for 5%).

Two-Wheelers — 28% (>350cc)

Two-wheelers above 350cc engine capacity attract 28% GST (luxury category). Motorcycles/scooters ≤350cc attract 28% without cess. The industry has been demanding a reduction to 18% for sub-250cc bikes (mass-market), but the Council has not yet revised this rate. E-two-wheelers enjoy 5%.

Auto Components & Spares

Automobile spare parts, accessories, and components attract 28% GST. This includes: engines, gearboxes, axles, brakes, body panels, filters, batteries (lead-acid 28%, lithium-ion 18%), and lubricants. The high rate on spares has been a concern for the aftermarket industry and vehicle maintenance costs.

Used/Second-Hand Vehicles

Sale of used vehicles by registered dealers (not individuals): GST on margin (selling price minus purchase price). Rate: 12% for vehicles ≤1200cc/≤1500cc diesel AND ≤4m. 18% for others (SUVs, luxury). If margin is negative, no GST. Individuals selling personal vehicles: NOT liable for GST.

Dealer Margins & ITC Chain

Auto manufacturers collect 28% + cess from dealers. Dealers charge same to end customers. Full ITC available in the supply chain (manufacturer → dealer → sub-dealer). End consumers bear the final tax. Company-owned vehicles: ITC blocked under Section 17(5) unless used for further taxable supply (cab operators, driving schools).

Automobile GST + Cess Rate Table

Vehicle TypeHSNGSTCessTotal
Small petrol car (<1200cc, <4m)870328%1%29%
Small diesel car (<1500cc, <4m)870328%3%31%
Mid-size car (>4m, <1500cc)870328%17%45%
Large car (>1500cc)870328%20%48%
SUV (>4m, >1500cc, >170mm GC)870328%22%50%
Electric vehicles (all)87035%0%5%
Two-wheeler (≤350cc)871128%0%28%
Two-wheeler (>350cc)871128%3%31%
Commercial trucks/buses8704/870228%0%28%
Three-wheelers/auto-rickshaw870328%0%28%
Tractors870112%0%12%
Spare parts & accessories870828%0%28%

Frequently Asked Questions

What is the total GST on cars in India?
Total GST on cars ranges from 29% to 50%: Small cars (<4m, <1200cc petrol) = 29% (28% + 1% cess). Small diesel (<4m, <1500cc) = 31%. Mid-size = 45% (28% + 17%). Large cars (>1500cc) = 48% (28% + 20%). SUVs (>4m, >1500cc, >170mm ground clearance) = 50% (28% + 22%). Electric vehicles enjoy just 5% with no cess.
Why are electric vehicles taxed at only 5%?
The GST Council reduced EV rate from 12% to 5% (no cess) in August 2019 to promote green mobility, reduce oil imports, and meet climate commitments. This makes EVs the lowest-taxed motor vehicles in India. The policy aligns with FAME-II incentives and state-level EV subsidies to accelerate EV adoption.
Can businesses claim ITC on cars purchased?
Generally NO — ITC on motor vehicles is blocked under Section 17(5) of CGST Act. Exceptions: (1) Vehicles used for further supply (car dealers), (2) Vehicles for passenger transport (cab/taxi operators), (3) Vehicles for driving school/training, (4) Vehicles for transportation of goods. Personal/employee use = blocked.
How is GST calculated on used/second-hand cars?
Registered dealers selling used cars pay GST on MARGIN only (selling price minus purchase price). Rate: 12% for small cars, 18% for luxury/SUVs. If margin is negative or zero, no GST payable. Individual selling personal car to another individual: NO GST applicable (not a supply in course of business).

Auto Dealer GST — End-to-End Automated

Laabam.One handles automobile invoicing with cess calculation, HSN-based rate lookup, used car margin scheme, ITC reversal for blocked credits, and multi-location dealer compliance.

Explore GST Law