AutomobileMotor Vehicles

GST on Automobile — Cars 28%+Cess, EVs 5%, Parts 28%

Complete GST guide for automobile sector: new cars (28% + 1-22% cess by category), electric vehicles (5%), two-wheelers (28%), used cars (margin scheme), auto parts, servicing, insurance, leasing vs buying, and ITC restrictions under Section 17(5).

GST rates were revised in September 2025, and the rates on this page have not yet been checked by a tax professional against that revision. Confirm the current rate in the CBIC rate notifications before you invoice.

28%+1% Cess

Small Cars (<4m, <1200cc)

28%+3% Cess

Mid-Size (1200-1500cc)

28%+22% Cess

SUVs (>4m, >1500cc)

Electric Vehicles

28%

Two-Wheelers

28%

Auto Parts/Accessories

18%

Car Servicing

12/18%

Used Cars

Automobile — GST Framework

New Cars — 28% + Compensation Cess

All motor vehicles attract 28% GST + compensation cess (varies by type): (1) Small cars (<4m length, petrol <1200cc or diesel <1500cc): 28% + 1% cess = 29%. (2) Mid-size (≥1200cc petrol, ≥1500cc diesel, <4m): 28% + 3% cess = 31%. (3) Large cars/SUVs (≥4m length, ≥1500cc engine, ground clearance ≥170mm): 28% + 22% cess = 50%. (4) Luxury cars (>₹10L engine capacity >1500cc): 28% + 20% cess = 48%. Compensation cess was meant to expire March 2026 but extended to repay states' COVID borrowing. Total tax on luxury SUV: 50% GST+cess + ~10-15% registration/road tax = effectively 60-65% of ex-factory price reaches government.

Electric Vehicles — 5% (Concessional)

EVs (all types — cars, buses, two-wheelers, three-wheelers): 5% GST with NO cess. EV chargers/charging stations: 5% (on supply of service — electricity supply is outside GST, but charging service taxable). EV batteries (lithium-ion): 18% (when sold separately as goods). EV battery as part of vehicle: included in 5% (composite). Charging infrastructure equipment: 18%. Solar-powered EV charging: 5% on service. Government rationale: promote EV adoption — pre-GST EVs were taxed 12%+ (excise+VAT). 5% is among world's lowest EV tax rates. Impact: India EV sales grew 200%+ since 5% GST introduction. Issue: no ITC credit for EV manufacturers on 18% inputs against 5% output = inverted duty structure — but refund available.

Two-Wheelers & Three-Wheelers

Two-wheelers (all — scooters, motorcycles, mopeds): 28% GST. NO compensation cess on two-wheelers (only on motor cars). Effective rate: just 28% (unlike cars which are 28%+cess). Industry has lobbied for reduction to 18% — argument: two-wheelers are 'necessity' not 'luxury' (70% of Indian vehicles are two-wheelers). 43rd Council discussed but deferred. Three-wheelers (auto-rickshaw): 28% (petrol/diesel). Electric three-wheelers: 5% (EV concession). CNG/LPG three-wheelers: 28%. Spare parts for two-wheelers: 28%. Helmets: 18% (safety equipment — was 28%, reduced in 2018). Tyres (all vehicles): 28%. The 28% on two-wheelers is arguably regressive — affects lower-middle class mobility.

Used/Second-Hand Cars

Used car sale by REGISTERED DEALER (organized sector — Maruti True Value, Mahindra First Choice): GST on MARGIN only (sale price minus purchase price). If dealer bought at ₹5L, sells at ₹6L → GST on ₹1L margin. Rate: 12% (for cars ≤1200cc/1500cc and ≤4m) or 18% (larger/luxury). If sold at LOSS (sale < purchase): NO GST payable. Used car sale by INDIVIDUAL (unregistered person): NO GST — it's not in course of business (private sale). Used car sale by COMPANY (registered, selling company car): 18% GST on transaction value (not margin scheme — full value). Depreciation doesn't reduce GST liability. Key: margin scheme is ONLY for dealers whose business is buying/selling used cars.

Auto Parts, Accessories & Servicing

Spare parts/accessories (all categories): 28% GST. Includes: bumpers, body parts, brakes, clutch, filters, mirrors, seat covers, alloy wheels, infotainment systems. Tyres (all types): 28%. Lubricants/engine oil: 18%. Car servicing/repair (labor + parts): 18% on service charges + 28% on parts (if separately billed). If COMPOSITE bill (single amount for service+parts): 18% on total (service is principal supply for repair). Car washing: 18%. Car insurance: 18%. Extended warranty: 18%. Annual Maintenance Contract (AMC): 18%. Registration charges (RTO): NOT GST — government fee. Road tax: NOT GST — state tax. Fastag: 0% (prepaid payment instrument, not supply).

Commercial Vehicles & Fleet

Trucks/lorries (goods carriers): 28% + variable cess (0-4% based on engine/fuel). Buses (>12 passengers): 28% (no cess if public transport). School buses: 28% (no concession). Ambulances: 28% + 0% cess (no cess on ambulance). Taxi/fleet vehicles: 28% + applicable cess. Leasing of vehicles (operating lease to company): 18% GST on lease rental. Vehicle bought for business (input): ITC available ONLY if used for further taxable supply (taxi operators, transport companies). ITC NOT available: cars/vehicles for employee transport (blocked under Section 17(5) — unless company is in transport business). Demo cars for dealers: ITC available (used for business of selling cars). The Section 17(5) ITC block on motor vehicles is one of the most litigated GST provisions.

Automobile — GST Rate Table

Item	HSN/SAC	GST Rate	Notes
Small car (<4m, <1200cc petrol)	8703	28%+1%	29% total (cess)
Mid-size car (1200-1500cc)	8703	28%+3%	31% total (cess)
SUV (>4m, >1500cc, >170mm GC)	8703	28%+22%	50% total (cess)
Electric vehicles (all)	8703	5%	No cess, concessional
Two-wheelers (all)	8711	28%	No cess
Auto parts/accessories	8708	28%	All spare parts
Tyres	4011	28%	All vehicle tyres
Car servicing (labor)	SAC 9987	18%	Repair/maintenance
Motor insurance	SAC 9971	18%	Third-party + own damage
Used car (margin — dealer)	8703	12/18%	On margin only
EV charger/station service	SAC 9987	5%	Charging service
Fuel (petrol/diesel)	N/A	Outside GST	Central+State excise/VAT

Frequently Asked Questions

What is the total tax on buying a new car in India — GST + registration + road tax?

Total government take on a new car purchase: (1) GST + Cess: 29% (small) to 50% (luxury SUV) — on ex-factory price. (2) Road tax (state): varies 5-20% of ex-showroom (e.g., Maharashtra 11-13%, Delhi 4-8%, Karnataka 13-18%, Kerala up to 21%). (3) Registration (RTO): ₹600-₹5,000 (nominal). (4) TCS (Tax Collected at Source): 1% if car >₹10 lakh (adjustable against income tax). Example — Hyundai Creta (mid-segment SUV ~₹15L ex-showroom): Ex-factory: ~₹11.5L. GST+Cess (31%): ~₹3.5L = ex-showroom ₹15L. Road tax (Maharashtra 11%): ₹1.65L. Registration: ₹3,000. Insurance (18% GST on premium): ₹45K+₹8K GST. On-road: ~₹17.5L. Government collected: ₹3.5L (GST) + ₹1.65L (road tax) + ₹8K (insurance GST) = ~₹5.2L on a ₹11.5L product = ~45% effective tax rate.

Can a business claim ITC (input tax credit) on cars purchased for company use?

Section 17(5) of CGST Act BLOCKS ITC on motor vehicles EXCEPT in specific cases: ITC BLOCKED (no credit): (1) Car bought for employee commute. (2) Car as company asset for director/MD use. (3) Car for general business purposes (even if 100% business use). (4) Demo cars at dealership (debated — some tribunals allow). ITC ALLOWED: (1) Motor vehicles used for TRANSPORTATION OF PERSONS — if business is providing transport service (Ola, Uber, cab operators). (2) Vehicles used for TRAINING (driving school). (3) Vehicles used for FURTHER SUPPLY (dealer buying cars to resell). (4) Vehicles for TRANSPORTATION OF GOODS (trucks by logistics companies). Key: even if car is 100% for business meetings/client visits, ITC is blocked. This makes company cars expensive. Many companies now lease instead of buy — lease rentals (18% GST) allow ITC claim on the rental amount.

Why is petrol/diesel outside GST — will it ever be included?

Petroleum products (petrol, diesel, ATF, natural gas, crude oil): EXCLUDED from GST under Section 9(2) read with Schedule III. They remain under old regime: Central Excise + State VAT. Current taxes on petrol (approx): Base price: ₹55-60/L. Central excise: ₹19.90/L. State VAT: 25-35% (varies — ranges ₹15-25/L). Dealer commission: ₹3-4/L. Retail price: ₹95-110/L. Why NOT in GST: (1) Revenue: petroleum contributes ₹4-5 lakh crore annually to Centre+States combined — bringing into GST (max 28%) would mean MASSIVE revenue loss. (2) State opposition: VAT on petroleum is states' largest own-revenue source — they refuse to surrender it. (3) Compensation: no mechanism to compensate states for petroleum revenue loss. (4) Rate: even at 28% (highest slab), tax on petrol would be LOWER than current 50-60% — would reduce pump price by ₹20-25/L. (5) Timeline: GST Council has constitutional power to include petroleum — but political consensus absent. Likely timeframe: 2028-2030 at earliest, starting with ATF/natural gas.

How does GST work for car leasing vs buying — which is more tax-efficient?

BUYING a car (company): Purchase price includes 28-50% GST+cess. ITC: BLOCKED under Section 17(5). Depreciation available under Income Tax. Total tax cost on ₹20L car: ~₹6L GST (stuck, no ITC) + ₹3.6L (18% insurance, annual). LEASING a car (operating lease): Monthly lease rental: GST at 18%. ITC: AVAILABLE on lease rental (it's a 'service', not blocked under 17(5)). The Supreme Court in IndusInd Bank case (2020) and subsequent rulings confirm: lease of vehicle is SUPPLY OF SERVICE — ITC available to lessee. Example: Car worth ₹20L leased at ₹45K/month for 4 years. GST on lease: ₹8,100/month (18%). Annual ITC claim: ₹97,200. Over 4 years: ₹3.89L ITC recovered. vs BUYING: ₹0 ITC recovery (blocked). Net saving through leasing: ₹3.89L over 4 years. This is why corporate India has shifted massively to vehicle leasing. Caveats: (a) Total lease cost may exceed purchase price. (b) Asset ownership lies with lessor. (c) Works only for registered businesses claiming ITC.

Auto Dealer Billing — Cess Calculation, Margin Scheme, Lease Invoicing

Laabam.One auto-applies correct cess rate by vehicle category (size/engine/fuel), handles used car margin scheme invoicing, fleet lease GST, Section 17(5) ITC reversal tracking, and insurance premium GST computation.

Explore GST Law