In the dynamic landscape of the Indian automotive industry, understanding the Goods and Services Tax (GST) rates on cars, vehicles, and automobiles is crucial for both consumers and businesses. In this blog we will discuss GST on vehicles and insurance in India.
GST, implemented in 2017, streamlined the indirect tax structure in India. When it comes to vehicles, GST is levied at different rates based on the type and purpose of the vehicle. Let's delve into the specifics:
Passenger cars fall under the 28% GST bracket, with an additional cess ranging from 1% to 22%, depending on factors such as engine capacity and type. Buyers need to consider these additional cess charges when budgeting for their new ride.
Two-wheelers, a popular choice for many Indian commuters, attract a GST rate of 28%. However, like passenger cars, a cess is applicable based on factors such as engine capacity.
Recognising the need for a sustainable future, the government offers a boost to electric mobility. Electric vehicles enjoy a reduced GST rate of 5%, making them an attractive option for eco-conscious consumers. This initiative aims to promote cleaner transportation and reduce the carbon footprint.
Commercial vehicles, including trucks and buses, are subject to a GST rate of 28%, similar to passenger cars. However, the additional cess is comparatively lower, making it a more straightforward taxation structure for businesses involved in the transportation sector.
Apart from the vehicle purchase, understanding the implications of GST on vehicle insurance is equally important. Vehicle insurance, a mandatory requirement for all vehicles on Indian roads, attracts a GST rate of 18%. This includes both third-party liability insurance and comprehensive insurance policies. Consumers should note that the 18% GST applies not only to the premium amount but also to any additional charges or fees associated with the insurance policy. Therefore, when calculating the overall insurance cost, it's essential to account for the GST component.
The government's push for a sustainable future is evident in the preferential treatment given to electric vehicles. By applying a mere 5% GST on electric vehicles, policymakers aim to incentivize the adoption of eco-friendly transportation options. This reduced rate is a significant advantage for consumers looking to make the switch to electric vehicles, not only from an environmental perspective but also from a financial one.
Commercial vehicles play a pivotal role in the country's logistics and transportation sector. With a 28% GST rate and a relatively lower cess, the taxation structure for commercial vehicles is designed to support businesses engaged in the movement of goods and passengers. However, businesses should carefully evaluate the overall cost implications, including GST, before making substantial investments in their fleet.
In conclusion, as the automotive industry continues to evolve, staying abreast of GST regulations is essential for a seamless and informed vehicle purchase experience. The government's initiatives, such as reduced GST on electric vehicles, demonstrate a commitment to fostering sustainable practices and steering the nation toward a cleaner, greener future.
GST on cars in India is implemented across multiple slab rates of 28%, 18%, 12% and 5%. The most relevant GST rate on cars is 28% which applies to motor vehicles including those for commercial as well as personal use.
The GST rate on cars depends on several factors such as length, fuel type and engine capacity. For instance, a compensation cess of 3% and 1% respectively is now applicable on 1500cc diesel and 1200cc petrol automobiles of length up to 4000 mm with passenger capacity of 10 individuals to less than 13 individuals.
The GST rate on electric vehicles has been reduced from 12% to 5%. Additionally, GST on charging stations or chargers for electric vehicles has been reduced from 18% to 5%.
The Indian government offers a low GST rate of 5% on all EVs, which is significantly lower than the tax burden diesel and petrol cars have to bear. Furthermore, at the time of paying back the EV loan, the customer may get an exemption of up to Rs 1,50,000 under the recently added section, 80EEB.
The two taxes charged to the end consumer on cars and bikes previously were VAT and excise, with an average combined rate of 26.50% to 44% which is higher than the GST rates of 18% and 28%. Therefore, there has been less burden of tax on the end consumer under GST.