Introduction

India's Goods and Services Tax (GST) system was introduced to refine and simplify the taxation landscape, covering a variety of goods and services, including automotive vehicles. The GST categorizes vehicles under distinct slab rates, influencing the total tax imposition on cars. This detailed guide offers insights into the GST rates for different types of cars, compensation cess charges, and recent amendments affecting vehicle taxes.

GST Rates on Cars

Under India's GST framework, motor vehicles are classified into various tax slab rates including 5%, 12%, 18%, and 28%. Primarily, the rate of 28% applies to most cars used for personal or commercial purposes. Yet, the tax liability can surpass the base GST rate due to the addition of a compensation cess.

1. GST on Cars for Personal Use

For personal use, vehicles and their components attract different GST rates based on the type and specifications of the vehicle:

• 5% GST: Applied to vehicles specifically designed for disabled users and associated accessories, introduced in the 31st GST Council Meeting (December 2018).
• 12% GST: Covers electric motor-driven vehicles, including two and three-wheelers, and fuel cell vehicles like hydrogen-powered ones. This rate also applies to non-motorized vehicles like bicycles.
• 18% GST: Pertains to specialized vehicles for physically handicapped users under specific conditions, baby carriages, and their parts.
• 28% GST: The standard rate for vehicles such as petrol/diesel cars, motorcycles, and mopeds, potentially increased by compensation cess.

2. Compensation Cess on Cars

An additional compensation cess is levied over the GST to offset potential revenue losses in manufacturing states post-GST implementation.

• Petrol/CNG/LPG Cars:
  • Less than 1200cc & below 4 meters: 28% GST + 1% Compensation Cess = 29%
  • Less than 1200cc & above 4 meters: 28% GST + 15% Compensation Cess = 43%
  • Above 1200cc: 28% GST + 22% Compensation Cess = 50%
• Diesel Cars:
  • Less than 1500cc & below 4 meters: 28% GST + 3% Compensation Cess = 31%
  • Less than 1500cc & above 4 meters: 28% GST + 20% Compensation Cess = 48%
  • Over 1500cc with specifications: 28% GST + 22% Compensation Cess = 50%
• Electric Cars & Fuel Cell Vehicles: 12% GST + Nil Compensation Cess = 12%
• Ambulances & Three-Wheeler Vehicles: 28% GST + Nil Compensation Cess = 28%

This cess is influenced by engine capacity, vehicle size, and usage, impacting the tax liabilities significantly.

3. GST on Commercial Vehicles

For commercial vehicles used in transportation of passengers, goods, or agriculture, GST varies from 12% to 28%:

• 12% GST: For agricultural tractors and trailers.
• 18% GST: For bio-fuel buses, refrigerated vehicles, and special-purpose vehicles like cranes.
• 28% GST: For road tractors above 1800cc, vehicles carrying more than 10 people, and goods transport vehicles excluding refrigerated types.

A 15% compensation cess also applies to commercial vehicles transporting up to 13 people.

4. GST on Used Cars

Initially, used cars faced GST similar to new vehicles but were later revised to encourage market growth:

• 12% GST: For used petrol cars up to 1200cc and used diesel cars up to 1500cc.
• 18% GST: For used petrol cars above 1200cc and diesel cars over 1500cc.

Significantly, from January 2018, compensation cess on used cars was nullified if no input tax credit was claimed, enhancing affordability in used car purchases.

5. GST Rate on Electric Vehicles

The GST for electric vehicles and their accessories was reduced to 5% in the 36th GST Council meeting in 2019. This initiative supports the government's cleaner energy vehicle adoption agenda.

Conclusion

The GST on cars in India is multifaceted, involving various rates and cess charges that critically influence the tax burden. Awareness of these rates aids consumers and businesses in making prudent vehicle purchases. With constant updates in GST and cess from the GST Council, staying informed is essential for compliance and tax liability management.

For more details, tools like Paisabazaar’s GST Rate Finder and HSN/SAC Code Finder offer up-to-date insights specific to vehicle types and GST rates.