Know the GST rates on used cars, electric vehicles & commercial vehicles in India. Understand impact, ITC rules, and compliance updates.
Navigating the Goods and Services Tax (GST) landscape can be daunting, especially when dealing with vehicles. Whether you’re buying a used car, considering an electric vehicle (EV), or managing a fleet of commercial vehicles, understanding the applicable GST rates is crucial. GST on used cars has been standardized to 18%, significantly influencing the resale market. Meanwhile, electric vehicles attract a GST rate of 5%, reflecting the government’s push towards sustainable transport.
This reduced rate makes EVs an attractive option for eco-conscious buyers. On the other hand, commercial vehicles are subject to a higher GST of 28%, along with a variable cess that depends on the vehicle’s specifications. This can add a substantial amount to the overall cost, impacting businesses that rely heavily on transportation. This blog will explore the detailed GST rates for these vehicle categories, providing insights into how taxes affect vehicle pricing, sales, and compliance for dealers and consumers.
What is the GST on Used Cars?
Under the GST margin scheme, used cars are taxed at 18% only on the dealer’s profit margin, not the total sale price. Dealers cannot claim Input Tax Credit (ITC) on the purchase of these vehicles.
| Type of Vehicle | GST Rate | Compensation cess | Total applicable cess |
| Petrol cars with engine capacity up to 1200cc | 18% | Nil | 18% |
| Petrol cars with engine capacity over 1200cc | 18% | Nil | 18% |
| Diesel cars with engine capacity up to 1500cc | 18% | Nil | 18% |
| Diesel cars with engine capacity over 1500cc | 18% | Nil | 18% |
Example: Selling a Used Car at a Loss
Suppose a dealer purchases a used car for Rs. 15 lakh and sells it for Rs. 12 lakh. The margin is calculated as follows:
Margin = Selling price – Purchase price
Margin = Rs. 12 lakh – Rs. 15 lakh = (-Rs. 3 lakh)
Since the margin is negative, indicating that the dealer is selling the car at a loss, no GST is applicable because there is no profit being generated from the sale.
What is the GST Rate on Electric Vehicles?
The current GST rate on electric vehicles is 5%. This is a lower rate than the GST rate on petrol and diesel vehicles.
Previously, the GST rates for these transactions were unclear, often resulting in higher taxes. The Council has recommended simplifying this with a 5% rate for private sales and maintaining the 18% for business sales on profit. These measures aim to streamline taxation and foster the growth of eco-friendly transportation options.
In 2019, India made a significant move to encourage the adoption of electric vehicles (EVs) by slashing the GST rates on these cleaner and greener transport options. This reduction was aimed at making EVs more affordable for the general public and boosting their use across the country. The HSN code for electric cars is 870240, which is essential for categorizing these vehicles under GST regulations.
| Particulars | Current GST Rates |
| EV Cars | 5% |
| EV 2 and 3 Wheelers | 5% |
| Electronic Charging Stations | 5% |
| Petrol/CNG/LPG/Diesel Vehicles | 28% |
This strategic adjustment in GST rates reflects India’s commitment to promoting sustainable transportation solutions and reducing the country’s carbon footprint. By making EVs more financially accessible and supporting the development of necessary charging infrastructure, the government aims to accelerate the shift towards electric mobility.
What is the GST Rate on Commercial Vehicles?
Below is the GST rate structure for various types of commercial vehicles, outlining the applicable tax rates based on their classification:
| Type of Vehicle | GST Rate |
| Tractors except road tractors for semi-trailers with engine capacity exceeding 1800cc | 12% |
| Self-loading/self-unloading trailers for agricultural purposes | 12% |
| Motor vehicles for the transport of ten or more persons, including the driver | 28% |
| Goods transport vehicles | 28% |
| Motorcycles and mopeds with or without sidecars | 28% |
| Accessories and parts of motorcycles, including sidecars | 28% |
Input Tax Credit (ITC)
Input tax credit (ITC) is a credit that a registered taxpayer can claim on the GST paid on inputs used in the course of business. ITC can be used to offset the GST payable on output.
Registered taxpayers who purchase commercial vehicles for business purposes can claim ITC on the GST paid on the purchase of the vehicle. However, there are some restrictions on the ITC that can be claimed. For example, input tax credit cannot be claimed on the GST paid on the purchase of motor vehicles used for the transportation of persons with a seating capacity of less than or equal to 13 persons, including the driver.
Impact of GST on Commercial Vehicle Pricing
The introduction of GST has had a mixed impact on commercial vehicle pricing. On the one hand, the GST rate on commercial vehicles is lower than the previous tax rates. This has led to a decrease in the price of some commercial vehicles. On the other hand, the increase in the input tax credit (ITC) that can be claimed on the purchase of commercial vehicles has offset some of the benefits of the lower GST rate. As a result, the overall impact of GST rates on commercial vehicle pricing has been neutral.
GST Rate on Commercial Vehicle Rentals and Leases
The GST rate on commercial vehicle rentals and leases is 18%. This is the same rate that applies to the supply of other goods and services. However, there are some exemptions and concessions that are available to the commercial vehicle rental and leasing industry. For example, there is a concession that allows the lessor to pay GST on the lease amount on a quarterly basis, instead of on a monthly basis.
E-way Bill and Its Relevance
The E-way bill is an electronic document that is required for the transportation of goods by road in India. The E-way bill is generated online and contains information about the goods being transported, the consignor, the consignee, and the transporter. The E-way bill is mandatory for all consignments of goods with a value of more than Rs. 50,000. The transporter is responsible for generating the E-way bill and carrying it with the goods during transportation.
GST Returns and Compliance for Commercial Vehicle Operators
Commercial vehicle operators are required to register for GST and file returns on a regular basis. The frequency of filing returns depends on the turnover of the business.
In addition to filing returns, commercial vehicle operators are also required to pay GST on the supply of goods and services. They are also required to collect GST from their customers and deposit it with the government.
Benefits of GST Implementation on Commercial Vehicles
The implementation of GST has had several benefits for the commercial vehicle industry, including:
- Reduced paperwork: The E-way bill has replaced the physical waybill, which has reduced the amount of paperwork required for the transportation of goods.
- Improved logistics: The implementation of GST has led to improvements in logistics, as it has made it easier for businesses to transport goods across state borders.
- Reduced tax evasion: The implementation of GST has made it more difficult for businesses to evade taxes, as it has made it easier for the government to track the movement of goods and to identify potential tax evasion.
Challenges and Concerns in GST Implementation
The implementation of GST has also had some challenges, including:
- Complexity of the law: The GST law is complex and can be difficult for businesses to understand and comply with.
- High compliance costs: The compliance costs of GST are high for businesses, as they are required to register for GST, file GST returns, and collect and deposit GST.
- Transition issues: There were some transition issues when GST was implemented, as businesses had to adapt to the new tax system.
There have been some recent updates and amendments to the GST law that affect commercial vehicle operators. These include:
Recent Updates and Amendments for Commercial Vehicles under GST
Conclusion
In conclusion, understanding the GST on used cars, electric vehicles and commercial vehicles is essential for both buyers and sellers in India. Whether you’re purchasing a new commercial vehicle, a pre-owned car, or an electric vehicle, knowing the applicable tax rates helps in making informed decisions and ensuring compliance.
Electric vehicles, in particular, benefit from lower GST rates and government incentives, promoting greener transportation. By staying informed about these tax implications, businesses and consumers can navigate the vehicle market with confidence, ensuring smoother transactions and cost-effective purchases.
Disclaimer This is not a comprehensive guide to GST on commercial vehicles. For more information, please talk to our expert.
Frequently Asked Questions (FAQs)
The GST rate for used cars is 18%, charged only on the profit margin, which is the difference between the purchase and sale price of the vehicle.
Electric vehicles attract a GST rate of 5%.
The GST rate on commercial vehicles ranges from 12% to 28%. The specific rate depends on the type of vehicle and its engine capacity. For example, the GST rate on petrol cars with an engine capacity up to 1200cc is 12%, while the GST rate on electric vehicles is 5%.
Yes, electric vehicles enjoy a reduced GST rate of 5% to encourage their adoption, as part of government incentives.
GST on EV charging services is levied at a standard rate of 18% across India.
The inclusion of GST at 28% plus cess increases the upfront cost of commercial vehicles, impacting overall pricing.
Yes, the lower GST rate of 5% on electric vehicles makes them comparatively cheaper than conventional vehicles taxed at higher rates. What is the GST rate on used cars in India?
What is the GST rate for electric vehicles?
What is the GST rate on commercial vehicles?
Are there any GST exemptions for electric vehicles?
What GST rate applies to EV charging services in India?
How does GST impact the pricing of commercial vehicles?
Are electric vehicles cheaper due to lower GST rates?
