GST Sectoral Impact

GST Sectoral Impact

GST rates for automobiles – good, bad, bad

Despite the announcement of GST rates, potential buyers of passenger vehicles are left wondering – if they buy one in the GST era, they stand to gain or lose. In this blog, we will reject what the automobile sector will look like in terms of GST rates announced by the GST Council.

Old rule tax In the
old regime, vehicles were 12.5% ​​to 27% (based on engine capacity and car size); Additional obligations of Essence i.e. 1%; Automobile Chess 0.125%; Infrastructure chess – which ranges from 1% to 4% (based on car type) and finally 14.5% on VAT – varies from state to state.

GST rates for vehicles

motor vehicles

jiest under all taxes currently levied on motor vehicles at a tax rate of 28 percent, tied with the addition of chess – from 1% to 15%, GST compensation chess rules, as follows: –

The type of automobileLengthEngine efficiencyTax rate
Small carLess than 4 mLess than 1200 cc1%
Small carLess than 4 m1201 cc – 1500 cc3%
Mid-segment carMore than 4 mLess than 1500 cc15%
Big carsMore than 4 mMore than 1500 cc15%
Hydrogen Vehicles (Based on Fuel Cell Technology)More than 4 m15%
Motorcycles sMore than 350 cc3%
Motor vehicles (capacity 10 to 13 persons)15%

In the opening scene, if the lines come in, it has arrived. But a quick comparison of the interest rates imposed on motor vehicles shows that between the current regime and the GST –

Current taxation systemGST
Type of carExcise taxEncicitiInfra lineAutomobile lineThe VAT lineTotal Tax (approx.)GSTExtra taxTotal Tax (approx.)
Small cars12.5%1%1%0.125%14.5%31%28%1% – 3%29% –32%
Luxury cars27%1%4%0.125%14.5%51%28%15%43%

Due to the taxing nature of the current rule, the buyer of a small car is taxed at almost 31%, while the luxury car is taxed at almost 51%. During the GST period, however, taxes are no longer high. Buyers of small and medium-sized vehicles will continue to pay the same rate, even if they are bracketed under the highest tax sheet. However, real interest rates can cut the tax rate by almost 8 percentage points for those who want to go for luxury vehicles. If we are still flooding the Addis and Mercedes Indians on the streets, in times to come.

Electric Vehicles

However, please note that electric vehicles have been introduced to a different proportion of GST which is taxed at 12% GST. Electric vehicles usually have a customary duty reduction of 6%, and most states enjoy reduced VAT rates of 5% – and the benefit will certainly continue during the GST period. Overall, the low GST rate should provide a boost to electric mobility across India, and is a clear sign of the government promoting environmentally friendly technologies.


With both mid-segment hybrid vehicles (under 1500) and high-class hybrid vehicles (over 1500 cc) now effectively taxing 43 percent, most hybrid automakers, as well as consumers, are planning to go hybrid.


GST rates for auto parts, tractor parts and car parts are not as wide as the auto parts segment. In the current regime, spare parts are 12.5 per cent and most states buy 5 per cent, while the current rate of 18.13 per cent is tax-free, rising to 28 per cent in the GST regime. This increase could affect the growth of the business in spare parts, and it could affect the industry at large.


While there are significant advantages due to the elimination of taxation taxes, the industry will enforce a higher tax on inputs, i.e. parts. For luxury vehicles and electric vehicles at an advantage, most standard vehicles maintained by the tax code and hybrids and auto parts, GST rates are definitely found in a mixed bag for automotive products.

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