GST on Car in India —
18%, 40% or 5%?
The correct GST rate on cars after GST 2.0 — small cars at 18%, large cars & SUVs at 40%, EVs at 5%, with compensation cess abolished. Plus TCS, ITC and used-car rules.
After GST 2.0 (effective 22 September 2025), cars fall under two slabs and the compensation cess has been abolished. Small cars — petrol/CNG/LPG up to 1200cc or diesel up to 1500cc, with length up to 4 metres — are taxed at 18%. Large cars and SUVs above those limits are taxed at a flat 40% with no cess. Electric vehicles attract just 5%. All passenger cars fall under HSN 8703.
GST Rate on Cars — Decision Table
The GST rate for every common vehicle segment after GST 2.0. The old 28% + compensation cess (up to 22%) structure has been replaced by a single 18% / 40% split; EVs stay at 5%.
| Vehicle Segment | Key Criteria | GST Rate | Cess |
|---|---|---|---|
| Small petrol / CNG / LPG car | ≤1200cc engine, length ≤4m | 18% | Nil |
| Small diesel car | ≤1500cc engine, length ≤4m | 18% | Nil |
| Mid-segment / large car (petrol) | >1200cc or length >4m | 40% | Nil |
| Mid-segment / large car (diesel) | >1500cc or length >4m | 40% | Nil |
| SUV / luxury vehicle | Above small-car limits | 40% | Nil |
| Electric vehicle (EV) | Battery-operated, any size | 5% | Nil |
| Three-wheeler (petrol / diesel) | Auto-rickshaw, cargo 3-wheeler | 18% | Nil |
| Electric three-wheeler | E-rickshaw, electric auto | 5% | Nil |
| Ambulance | — | 18% | Nil |
Rates reflect the GST 2.0 two-slab structure effective 22 September 2025; compensation cess on cars has been discontinued. Confirm the current schedule on the official GST portal before invoicing.
18% or 40% — Which Slab Is Your Car?
One test decides the slab for a fuel-powered car: does it stay within the "small car" limits? A small car must satisfy both a length cap (up to 4 metres) and an engine cap (petrol/CNG/LPG up to 1200cc, or diesel up to 1500cc). Cross either limit and the car moves to the 40% slab.
Small cars
- Petrol / CNG / LPG up to 1200cc
- Diesel up to 1500cc
- Length up to 4 metres
- Hatchbacks & compact sedans
- No compensation cess
Large cars & SUVs
- Engine above the small-car limits
- Length above 4 metres
- Mid-size sedans, large SUVs, luxury cars
- Flat 40% — no cess added
- Cheaper than the old 28% + up to 22% cess
Big cars and SUVs earlier bore 28% GST plus compensation cess of up to 22% — an effective burden near 50%. GST 2.0 replaces that with a single 40% rate and removes the cess, so most large cars and SUVs became cheaper, while small cars fell from 28% to 18%.
Not sure which slab your car falls into?
Get My Car GST Rate →Popular Car Models — GST Segment
Indicative classification of common models under the GST 2.0 slabs. Exact segment depends on the specific variant's engine and length — always verify before purchase.
| Model | Fuel | Segment | GST Rate |
|---|---|---|---|
| Maruti Alto K10 / S-Presso | Petrol | Small (≤1200cc, ≤4m) | 18% |
| Tata Tiago / Maruti WagonR | Petrol / CNG | Small (≤1200cc, ≤4m) | 18% |
| Hyundai i20 / Maruti Baleno | Petrol | Small (≤1200cc, ≤4m) | 18% |
| Honda City / Maruti Ciaz | Petrol | Large (>4m) | 40% |
| Toyota Innova / Mahindra Scorpio-N | Diesel | Large / SUV | 40% |
| Mahindra Thar / XUV700 | Diesel | SUV | 40% |
| Tata Nexon EV / MG ZS EV | Electric | EV (any size) | 5% |
A sub-4m car with a larger engine (e.g. some 1.5L diesels over the cap) can still fall in the 40% slab — both length and engine limits must be met.
How GST Adds Up — ₹6,00,000 Car
18% Small car
40% Large car / SUV
The figures above show only the GST component on the base value for illustration; the on-road price also includes dealer margin, insurance, registration and, above ₹10 lakh, TCS at 1%.
TCS on Car Purchase Above ₹10 Lakh
Under Section 206C(1F) of the Income Tax Act, a dealer must collect Tax Collected at Source (TCS) at 1% on the sale of any motor vehicle where the consideration exceeds ₹10 lakh. TCS is separate from GST — both apply on premium cars.
- TCS is collected on the ex-showroom price (inclusive of GST), not just the base value.
- It applies to a single transaction above ₹10 lakh — it is not cumulative across purchases.
- The TCS appears in the buyer's Form 26AS / AIS and can be claimed as credit against income tax while filing the return.
- TCS is an income-tax provision — it does not change the GST rate on the car.
A buyer of a ₹15 lakh car pays 40% GST (already built into the price by the manufacturer) plus 1% TCS collected by the dealer at billing. The GST is a supply tax; the TCS is a prepayment of your income tax that you recover when you file your return.
ITC and GST on Used Cars
For most buyers, GST paid on a car is a cost, not a credit. Section 17(5) of the CGST Act blocks Input Tax Credit on motor vehicles for transport of persons with seating capacity up to 13 (including driver).
ITC is allowed if
- You are a car dealer — vehicles are stock-in-trade
- You run passenger transport (taxi / cab / bus)
- You provide driving-training services
- The vehicle carries goods (goods carriage)
ITC is blocked if
- A business buys a car for employee / director use
- The car is for general office / personal transport
- Seating capacity is 13 or fewer and none of the exceptions apply
Used (second-hand) cars: GST applies only when a registered dealer sells, and only on the margin — the difference between selling price and purchase price — at 18%. If the margin is negative, no GST is payable. A private individual-to-individual sale of a used car is outside GST.
GST 2.0 simplified car taxation but the ITC block is unchanged — a company buying a car for staff still cannot recover the 18%/40% GST. Structure fleet and cab arrangements carefully; only dealers, transporters and driving schools get the credit.
Frequently Asked Questions
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