The automobile industry in India is a major enterprise that produces a great number of automobiles and motorcycles each year, powered primarily by the country's large population. The GST absorbed the majority of the indirect taxes.
GST on cars is applicable across different tax slab rates of 5%, 12%, 18% and 28%. Typically, GST on cars depends on several factors. Some of the prominent factors include –
Let's take a close look at the tables discussed below to find more on car GST rates levied on specific factors.
This table highlights the GST on vehicles as per their category.
|
Category of Car |
Model |
Pre-GST Tax Rate |
GST Rate on Car |
|
Small cars with an engine capacity less than 1200cc |
Volkswagen Polo, Hyundai Grand i10, Maruti Suzuki Swift, and Tata Tiago. |
28% |
18% |
|
Medium size cars with an engine capacity over 1200cc and less than 1500cc |
Honda Amaze, Nissan Kicks, Maruti Baleno, and Tata Nexon. |
39% |
18% |
|
Luxury car with an engine capacity above 1500cc |
Lamborghini Aventador, Bugatti Chiron, Toyota Land Cruiser, Land Rover, etc. |
42% |
28% |
|
SUVs with an engine capacity above 1500cc |
Renault Duster, Mahindra TUV, Jeep Compass, Maruti Vitara Brezza, etc. |
45% |
28% |
|
Electric vehicles |
Mahindra eVerito and Mahindra e20. Electric vehicles owners receive a direct deduction of 7.5% |
20.5% |
12% |
|
Fuel and engine type of car |
Fuel tank capacity |
Model |
Pre-GST Tax Rate |
GST rate on car |
|
Sub 4-meter cars with an engine for petrol |
Less than 1.2l |
Maruti Suzuki Dzire, Toyota Etios Liva, Hyundai Grand i10, Volkswagen Polo, etc. |
31.5% |
29% |
|
Sub 4-meter cars with an engine for diesel |
Over 1.5l |
Mahindra TUV 300, Hyundai i20, Maruti Suzuki Vitara Brezza, Ford Ecosport, etc. |
33.25% |
31% |
|
Sub 4-meter cars with an engine for both petrol and diesel |
For petrol - more than 1.2l For diesel – less than 1.5l |
Subcompact SUVs and sedans |
44.7% |
43% |
|
Larger than 4-metres SUVs for petrol and diesel engine |
Any capacity |
Tata Hexa, Mahindra Scorpio, Ford Endeavour, Mercedes-Benz GLC, etc. |
55% |
43% |
|
Larger than 4-metres non-SUVs for petrol and diesel engine type |
For petrol – over 1.2l For diesel - over 1.5l |
Hatchbacks and sedans |
51.6% |
43% |
|
Electric cars |
Nil |
Mahindra e20, Mahindra eVerito, etc. |
20.5% |
12% |
Additionally, a standard GST rate of car along with additional cess is levied on vehicles. Like, GST, cess is also dependent on the category and engine capacity of cars. The rate of cess levied on various types of automobiles can range between 1 and 15%.
These pointers focus on the influence of GST on the automobile industry and its components.
Previously customers used to pay both excise and VAT on the purchase price of bikes and cars. On average, the combined rate used to range between 26.5% and 44%.
With the introduction of the GST regime, the rates and charges levied on vehicles have reduced. It has come down to a range between 18% and 28%. This allows customers to pay a lower rate of tax on their purchase and facilitates easy savings.
GST on a car has reduced the overall cost of manufacture by subsuming previous taxes. Thus, manufacturers tend to benefit significantly because of this tax regime. It further improves the supply chain mechanism and enables them to procure automobile parts at a cheaper cost.
Both dealers and importers benefit under the GST regime as it enables them to claim an input tax credit, which was not possible earlier under the old system of taxation. IGST covers the excise paid on transfer of stock, whereas the advance received against the supply of goods is taxed as per GST norms.
The automobile industry has been struggling for over a year now. Factors like – economic slowdown, liquidity crisis, inflation and slumping sentiment among others have negatively affected the industry's domestic sales.
The rate of GST on a car belonging to a specific category with a particular fuel type and engine capacity is factored in to calculate the final sale price.
For example,
Hyundai i20 comes at a price range of Rs.6.49 lakh and Rs.8.3 lakh and attracts taxation as per the car GST rates. In addition to that, the car will also attract applicable cess among other charges.
Used car dealers pay taxes on the difference between the selling price and the buying price of a second hand car. It helps to eliminate the cascading effect of taxation. In case, the margin of the transaction is negative; dealers do not have to pay GST on car.
Additionally, the government has exempted GST on the purchase of second hand vehicles from an unregistered seller.
Notably, the car services and warranties extended by car dealers are taxed under the GST regime. This tax regime emphasises more on the consumption state, which ensures growth and viability for the automobile industry.
The GST tax system includes a provision for assistance for used automobile buyers. Dealers of used automobiles might pay tax on the difference in value between the selling and buying prices of used cars.
This remedy is intended to eliminate the cascading impact that is a source of concern for everyone who deals in used autos.
Furthermore, if the differential value is negative, the dealers are exempt from paying the tax on the differential value. The government also offers relief in the form of a GST exemption when purchasing a used car from an unregistered dealer.
The Act does provide for the imposition of GST on automobile services or warranties provided by car dealers.
As per experts, mid-segment cars can witness an increase in car prices; while the small diesel car segment is expected to be most affected.
Individuals can expect a sharp rise in prices of the same. Conversely, luxury cars or SUVs will extend lucrative offers and will make the prices of such brands a lot cheaper than they usually are.