GST on Cars in India
Cars attract 18% GST in India for small cars, and 40% GST for larger and luxury vehicles. Electric cars attract 5%.
Working out the GST on cars
The rate turns on the type of car, and the calculator below uses 18% — the rate for a small car. A larger or luxury vehicle is 40% and an electric car is 5%, so confirm the category against the table further down. Multiply the taxable value by 18 percent to get the GST, then add it to the base price for the total.
- For an intra-state sale, the 18% splits into 9% CGST and 9% SGST.
- For an inter-state sale, a single 18% IGST applies instead.
- The calculator on this page is pre-set to the 18% rate and handles both cases.
A worked example
Suppose a car has a taxable value of ₹5,00,000 before tax. Applying 18% GST works out as follows.
Car GST rates depend on the type of vehicle
Cars do not have one flat rate. GST 2.0 replaced the old 28%-plus-cess structure with three clean rates that turn entirely on engine size, length and fuel type. All passenger cars share HSN 8703, but the rate varies as below.
| Vehicle category | GST rate | Notes |
|---|---|---|
| Small petrol car (up to 1200cc, under 4m) | 18% | Down from 28% |
| Small diesel car (up to 1500cc, under 4m) | 18% | Down from 28% |
| Luxury cars & larger SUVs | 40% | Was 28% plus cess |
| Electric vehicles | 5% | Concessional, unchanged |
| Auto components | 18% | Now uniform across parts |
Is there a different GST on cars above ₹10 lakh?
No. It is worth saying plainly because it is a common search: GST on cars is not decided by price at all. There is no ₹10 lakh threshold, no ₹20 lakh threshold, and no slab that switches on the invoice value.
What decides the rate is engine capacity, body length and fuel type. A petrol car up to 1200cc and under 4 metres is 18% whether it costs ₹6 lakh or ₹12 lakh. Cross 1200cc or 4 metres and it is 40%, even at a modest price. An electric car is 5% at any price.
Price feels like the trigger because bigger, longer, more powerful cars cost more, so the 40% bracket correlates with expensive cars without being caused by them. Comparing two cars around ₹10 lakh, check the engine and the length on the brochure rather than the price tag.
A 40% rate can still mean a cheaper car
On paper, luxury cars moving from 28% to 40% looks like a hike. In practice it is often a cut, because the old system stacked a compensation cess of 17 to 22 percent on top of the 28%, pushing the effective burden close to 50%. GST 2.0 scrapped that cess and folded everything into a single 40%, so the total tax on many premium vehicles actually fell. For small cars the benefit is direct: 18% with no cess, down from an effective 29 to 31 percent.
Electric vehicles and the 5% rate
EVs keep a concessional 5% GST, untouched by the reforms, as part of the push for cleaner mobility. Against 18% on a small petrol car or 40% on a luxury model, that gap is substantial and is a major reason EVs have become more price-competitive.
Used cars, imports and disabled-driver exemptions
A used car bought from an unregistered seller is outside GST. Imported cars attract IGST on the assessable value plus customs duty, which raises their landed cost. Vehicles specially adapted for use by a person with a disability are exempt from GST.
Costs GST does not cover on a car
The ex-showroom price carries GST, but the on-road price includes several things that do not. Road tax and registration are state levies outside GST entirely, which is why on-road prices differ between states even when the ex-showroom price is identical. Motor insurance is a separate service taxed at 18%. Accessories fitted by the dealer carry their own rates, generally 18%, and should appear as separate invoice lines rather than being folded into the vehicle price.
| Component | GST treatment |
|---|---|
| Ex-showroom price | 18% or 40% by category |
| Road tax & registration | Outside GST (state levy) |
| Motor insurance | 18% as a service |
| Dealer-fitted accessories | Generally 18% |
| Extended warranty / AMC | 18% as a service |
Input tax credit on a business vehicle
This is more restrictive than most buyers expect. Section 17(5) blocks input tax credit on motor vehicles with seating capacity up to 13 persons, even when bought in a company name for genuine business use. The exceptions are narrow: the block does not apply if you are in the business of supplying vehicles, transporting passengers, or providing driving instruction. So a consultancy buying a car for client visits cannot claim the GST, while a taxi operator buying the same car can.
Discounts, bookings and cancellations
A discount shown on the invoice reduces the taxable value, so GST is charged on the discounted price. A post-sale cashback does not. A booking advance is not itself a supply, so GST crystallises when the vehicle is delivered and invoiced. If a booking is cancelled, the GST on any refunded amount is adjusted through a credit note.
Frequently asked questions
It depends on the car. Small petrol cars up to 1200cc and diesel up to 1500cc, both under 4 metres, are 18%. Luxury cars and larger SUVs are 40%. Electric vehicles are 5%. All use HSN 8703.
GST 2.0 replaced the old 28% plus compensation cess with a single 40% rate. Because the earlier cess added 17 to 22 percent, the total tax on many luxury cars actually dropped despite the higher headline number.
Electric vehicles attract a concessional 5% GST, which was left unchanged by the 2025 reforms to support EV adoption.
Yes. Small cars moved from an effective 29 to 31 percent (28% GST plus cess) down to a flat 18% with no cess, effective 22 September 2025.
A used car bought from an unregistered seller is outside GST. A registered dealer may charge GST on the margin. Imported cars attract IGST plus customs duty.