New GST on Vehicles in India: Updated Tax Rates
- The new GST rates for vehicles in India, effective after September 22, 2025, are 18% for small petrol and diesel cars and 40% for mid-size, luxury cars, and SUVs.
- Previously, the GST rate for most vehicles was 28% with an additional compensation cess, varying by vehicle type.
- Electric vehicles have a lower GST rate of 5%, making them more affordable and eco-friendly compared to traditional vehicles.
- Used vehicles sold by registered dealers are taxed on the margin, with GST rates of 12% or 18%, but private sales between individuals are not taxed.
- Vehicle accessories and spare parts have GST rates of 18% or 28%, while EV batteries and charging services are taxed at 18%, causing concerns for uniform taxation in the EV industry.
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 Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST rates for petrol and diesel vehicles (no compensation cess).
| Vehicle Type | New GST Rate | Compensation Cess |
|---|---|---|
| Small petrol cars (<1200cc, <4m) | 18% | None |
| Small diesel cars (<1500cc, <4m) | 18% | None |
| Mid-size cars | 40% | None |
| Luxury cars | 40% | None |
| SUVs (>4m, >1500cc) | 40% | None |
Vehicle Type
New GST Rate
Compensation Cess
Vehicle Type
New GST Rate
Compensation Cess
Vehicle Type
New GST Rate
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Vehicle Type
New GST Rate
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This structure differentiates standard vehicles (generally 18%) from demerit/luxury categories (40%).
Old GST Rates on Vehicles
(Old GST Rates – Applicable Until 21st September)
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% |
Vehicle Type
GST Rate
Compensation Cess
Vehicle Type
GST Rate
Compensation Cess
Vehicle Type
GST Rate
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This structure helps regulate vehicle categories based on their emissions and luxury status.
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 registered dealer, GST is charged only on the margin (selling price minus purchase price).
- The applicable GST rate is usually 12% or 18%, depending on the vehicle type.
- If sold between individuals (non-business), no GST is applicable.
This margin scheme helps prevent double taxation on second-hand vehicles.
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GST on Vehicle Accessories & Spare Parts
Accessories and spare parts don’t enjoy concessional GST rates:
- Most accessories: 18% GST
- High-end items like alloy wheels, infotainment systems: 28%
- Standard parts (brake pads, filters, batteries): 18%
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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.
