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Planning to buy or sell a vehicle in India? It’s important to understand how the GST (Goods and Services Tax) applies. The gst on vehicles depends on several factors — such as the type of vehicle, fuel used, and its specifications. In this blog, we’ll explain the different GST rates on vehicles, from regular petrol cars to electric vehicles.
Petrol and Diesel Vehicles (Internal Combustion Engine)
Most traditional vehicles fall under the 28% GST slab. However, they also attract an additional Compensation Cess, which varies by vehicle type.
| Vehicle Type | GST Rate | Compensation Cess |
|---|---|---|
| Small petrol cars (<1200cc, <4m) | 28% | 1% |
| Small diesel cars (<1500cc, <4m) | 28% | 3% |
| Mid-size cars | 28% | 15% |
| Luxury cars | 28% | 20% |
| SUVs (>4m, >1500cc) | 28% | 22% |
This structure helps regulate vehicle categories based on their emissions and luxury status.
To promote clean energy, the government has applied a concessional 5% GST on electric vehicles. This rate applies to both two-wheelers and four-wheelers that are battery-operated.
So if you’re buying an EV, the tax burden is much lower than a regular vehicle, making them more affordable and eco-friendly.
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Selling or buying used vehicles? Here’s how GST works:
This margin scheme helps prevent double taxation on second-hand vehicles.
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Accessories and spare parts don’t enjoy concessional GST rates:
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Even though electric vehicles attract only 5% GST, components are taxed differently:
This disparity is a concern for the EV industry, which seeks uniform taxation across all related components.
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You can claim Input Tax Credit only under specific conditions, such as:
For personal or office use, Input Tax Credit on motor vehicles is not allowed.
Ensure every GST invoice for vehicle purchases or leases reflects accurate tax details.
BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.