GST is imposed on almost all Goods and services including the motor vehicles like cars, bikes, etc. Earlier, when VAT and excise duty was imposed on motor vehicle purchases, it inflated the price of the vehicle.
Now, after the implementation of GST, the prices of motor vehicles have decreased and are more affordable to the end user.
GST is imposed on motor vehicles at different rates depending on the type and features of the vehicle. The GST rate for cars is 28% with a cess of 15%. Motorcycles, scooters, and mopeds are taxed at the rate of 28% plus a cess of 3%.
Two-wheelers with engine capacity of more than 350cc attract a GST rate of 28% plus a cess of 15%. Other motor vehicles are taxed at the rate of 28% with a cess of 15%.
Now, with this tax imposed on people, there is a way using which you can claim back the GST by using Input Tax Credit (ITC).
In this article, we will discuss whether can GST is claimed on car purchases, what is the GST on Electric vehicles, etc.
Comparison of Pre and Post GST rates of SUVs, Sedans, and Hatchbacks
The following are the Comparison in GST rates of SUVs, Sedan and Hatchback pre and post-GST era-
SUV
| Particulars | Pre- GST (Rs) | Post- GST (Rs) |
| Cost of manufacturing | 10,00,000 | 10,00,000 |
| Excise duty at 30% | 3,00,000 | – |
| Production cost | 13,00,000 | 10,00,000 |
| Transportation, etc. | 10,000 | 10,000 |
| Sales charge | 25,000 | 25,000 |
| The base amount for tax calculation | 13,35,000 | 10,35,000 |
| VAT at 14%/ GST at 28% | 1,86,900 | 2,89,800 |
| Cess at 22% | – | 2,27,700 |
| Price | 15,21,900 | 15,52,500 |
Sedan
| Particulars | Pre- GST (Rs) | Post- GST (Rs) |
| Cost of manufacturing | 8,00,000 | 8,00,000 |
| Excise duty at 27% | 2,16,000 | – |
| Production cost | 10,16,000 | 8,00,000 |
| Transportation etc. | 10,000 | 10,000 |
| Sales charge | 25,000 | 25,000 |
| The base amount for tax calculation | 10,51,000 | 8,35,000 |
| VAT at 14%/ GST at 28% | 1,47,140 | 2,33,800 |
| Cess at 15% | – | 1,25,250 |
| Price | 11,98,140 | 11,94,050 |
Hatchback
| Particulars | Pre- GST (Rs) | Post- GST (Rs) |
| Cost of manufacturing | 5,00,000 | 5,00,000 |
| Excise duty at 12.5% | 62,500 | – |
| Production cost | 5,62,500 | 5,00,000 |
| Transportation etc. | 10,000 | 10,000 |
| Sales charge | 25,000 | 25,000 |
| The base amount for tax calculation | 5,97,500 | 5,35,000 |
| VAT at 14%/ GST at 18% | 83,650 | 96,300 |
| Cess at 1% | – | 5,350 |
| Price | 6,81,150 | 6,36,650 |
GST on Engine Type
GST rates also differ based on the type of engine used in the vehicle. Below, we have mentioned the GST imposed on different types of vehicles based on their engine type-
GST Rate based on Internal Combustion Engine
| Category | Model | HSN Code | GST rate | Compensation cess |
| LPG or CNG vehicles with engine capacity not exceeding 1200cc and length not exceeding 4000mm | Volkswagen Polo, Hyundai Grand i10, Maruti Suzuki Swift, etc. | 8703 | 18% | 1% |
| Diesel vehicles with engine capacity not exceeding 1500cc and length not exceeding 4000mm | Honda Amaze, Nissan Kicks, Maruti Baleno | 8703 | 18% | 3% |
| Engine capacity greater than 1500cc | Lamborghini Aventador, Bugatti Chiron, Toyota Land Cruiser | 8703 | 28% | 17% |
| SUVs (Engine capacity greater than 1500cc Length of more than 4,000mm ground clearance equal to or more than 170mm and popularly known as SUV as per the 48th GST Council meet) | Renault Duster, Mahindra TUV, Jeep Compass, Maruti Vitara | 8703 | 28% | 22% |
GST on Electric Vehicles
The GST Council has also proposed a differential GST rate of 5% for electric vehicles with no cess. This rate applies to all-electric vehicles including cars, scooters, and two-wheelers.
This will encourage the use of electric vehicles and reduce air pollution. Overall, the implementation of GST on motor vehicles has reduced the overall cost and made them more accessible to the public.
Claiming Input Tax Credit on Car Purchase
Claiming Input Tax Credit is only applicable if the vehicle is used for business activities. Section 17(5) of the GST Act mentions the types of vehicles on which ITC is not available.
A vehicle with a seating capacity of less than or equal to 13 people will not be covered under the ITC claims, however, ITC will be available if the vehicle meets the following criteria-
- An Employer giving a car to the employee will be considered for GST claiming when the vehicle is used for business purposes. You cannot claim GST on the vehicle used for the personal use of the employee.
- Showrooms use demo cars for display and test drives. The GST imposed on the vehicle can be claimed as ITC
- Any transport business involved in the logistics or passengers can claim ITC on the purchase of the vehicle
- ITC can also be claimed on hiring a vehicle for transportation on rental bases
FAQ
For small cars with an engine size of 1200cc and 1500cc for petrol and diesel engine respectively, the applicable GST rate is 12 percent, and card bigger than this size has a fixed 18 percent GST
The dealer of the used car has to pay for the difference between the selling and buying price and if the margin is negative there is no need to pay GST. the unregistered dealers do not need to pay any GST also vehicles used by Physically disabled persons are exempted from any GST.
The imported car attracts a GST of 28% and a 15% cess on addition to this, a customs duty is also levied on the importer of 30% for Semi knocked down kits of passenger vehicles and 15% for Completely knocked down kits of passenger vehicles.
Discounts given before the time or during the time of sales can be deducted from the transaction value and no GST will be levied on that amount. However, the GST invoice or tax receipt must mention the discount.
