New GST on Vehicles in India: Updated Tax Rates
- The car GST rate 2026 depends on the vehicle category. Small cars generally attract 18% GST, while specified mid-size, large and utility vehicles attract 40% GST without compensation cess.
- GST on car purchases was revised from 22 September 2025 for several vehicle categories; many cars were earlier taxed at 28% plus applicable compensation cess.
- Electric vehicles continue to attract 5% GST.
- Eligible sales of used vehicles by GST-registered sellers generally attract 18% GST on the margin value, not on the full sale price.
- Sale of a used vehicle by an individual who is not required to register under GST generally does not attract GST.
- Vehicle parts and accessories attract GST according to their applicable HSN classification.
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.
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New GST Rate on Vehicles in India
The revised rates applicable from 22 September 2025 are given below. GST on cars now follows the revised 18% and 40% structure, with compensation cess removed for these categories.
| Vehicle Type | Current GST Rate | Rate Before 22 Sep 2025 | Old Compensation Cess | Current Compensation Cess |
|---|---|---|---|---|
| Small petrol/CNG/LPG cars, engine up to 1200cc and length up to 4000 mm | 18% | 28% | 1% | None |
| Small diesel cars, engine up to 1500cc and length up to 4000 mm | 18% | 28% | 3% | None |
| Mid-size cars | 40% | 28% | 17% | None |
| Large cars | 40% | 28% | 20% | None |
| SUVs meeting the specified >1500cc, >4000 mm and ≥170 mm ground-clearance conditions | 40% | 28% | 22% | No |
Vehicle Type
Current GST Rate
Rate Before 22 Sep 2025
Old Compensation Cess
Current Compensation Cess
Vehicle Type
Current GST Rate
Rate Before 22 Sep 2025
Old Compensation Cess
Current Compensation Cess
Vehicle Type
Current GST Rate
Rate Before 22 Sep 2025
Old Compensation Cess
Current Compensation Cess
Vehicle Type
Current GST Rate
Rate Before 22 Sep 2025
Old Compensation Cess
Current Compensation Cess
Vehicle Type
Current GST Rate
Rate Before 22 Sep 2025
Old Compensation Cess
Current Compensation Cess
The revised structure replaces the earlier GST plus compensation cess system, with standard vehicles generally taxed at 18% and specified luxury/demerit vehicles taxed at 40% without cess.
GST on Electric Vehicles
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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GST on Used Vehicles
Selling or buying used vehicles? Here’s how GST works:
- If sold by a GST-registered dealer under the applicable margin scheme, GST is charged only on the margin value (selling price minus purchase price, subject to applicable rules).
- The applicable GST rate for eligible used vehicles is 18% on the margin value.
- If sold between individuals (non-business transactions), no GST is applicable.
This margin scheme helps avoid taxation on the entire value of second-hand vehicles and prevents double taxation.
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GST on Vehicle Accessories & Spare Parts
Accessories and spare parts are taxed according to their applicable HSN classification.
- Most vehicle accessories and spare parts attract 18% GST.
- GST rates depend on the specific product category and HSN classification.
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GST on EV Batteries and Charging Services
Even though electric vehicles attract only 5% GST, components are taxed differently:
- Lithium-ion batteries: 18%
- Charging services: 18%
This disparity is a concern for the EV industry, which seeks uniform taxation across all related components.
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Input Tax Credit (ITC) for Vehicles
You can claim Input Tax Credit only under specific conditions, such as:
- If you’re a car dealer or vehicle manufacturer
- If the vehicle is used for passenger transport (taxis, cabs)
- If used for driving schools or training
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.
