04 Sep 2019Posted By: Mudit Handa


7 Things to Know about GST on Automobile Industry

Goods and Services Tax regime has indeed increased the level of competence in all the sectors of the economy. The rules of GST registration and GST rates are currently judicially applied to almost all goods and services. These rates have been fairly applied for all the industries as per the nature of the supplies. 

One such noteworthy instance is of the automobile industry. Notably, India today stands as the 4th largest manufacturers of motor vehicles in the world. Moreover, above 210 million people in India own motor vehicles. So, it's worth knowing that what are the provisions of GST law for the automotive industry. 

 

1. What are the rates of GST on Motor Vehicles?

The GST provisions are clearly defined in the case of motor vehicles. GST rates applicable to vehicles are respectively 5%, 12%, 18%, and 28%


2. Which vehicles are placed in the highest GST rate?

The highest GST rate of 28% applies to-

  • All petrol & diesel cars, including: 
  • Small car, sedans, station wagons
  • Sports cars, 
  • Luxury cars & SUVs 
  • Heavy commercial vehicles.

 


3. What is the highest total GST tax rate for vehicles?

Here, it's important to note that for all cars, where the GST @ 28% is not the only principle tax applicable. In this category, compensation cess of 22% is also applicable to such vehicles, notwithstanding the 28% GST rate. Hence, the overall tax rate on luxury & heavy vehicles comes out to be as high as 50%.

The input tax credit can be availed by the automotive dealer having GST registration


4. Which vehicles are placed in the GST rate of 5%?

The lowest GST rate on vehicles of 5% applicable to:- 

  • Carriages for use by differently-abled people, both motorized & non-motorized, and their spare parts & accessories. 
  • All electric vehicles 
  • Here, the input tax credit can be availed by the car dealer having GST registration. 

These new GST rates of 5% were introduced in the 31st GST Council Meeting


5. Which vehicles are GST exempt?

Services of all-electric buses with a seating capacity of 12 passengers or above, run by local transport authorities shall be exempt from GST. in this case, no input tax credit can be availed by the automotive dealer having GST registration. 

GST on automobiles

This new GST provision was introduced in the 36th GST Council Meeting.


6. Which vehicles are placed in the GST rate of 12%?

Following are the vehicles where GST @ 12% is applicable:

  • Electric Vehicles, both 2 and 3 wheelers.
  • Hybrid Vehicles, which are driven by fuel cells using hydrogen fuel-cell technology.
  • Bicycles and non-motorized rickshaws and their spare parts and accessories
  • Hand driven vehicles such as rickshaws and hand carts
  • Animal-drawn carts (e.g. bullock carts, tonga, horse-carriage)

7. Which vehicles are placed in the GST rate of 18%?

Following are the vehicles where GST @ 18% is applicable:

  • Vehicles for differently-abled people, subject to the condition that modification has to be done to make them usable for such persons. E.g. a scooter with supporters.
  • Baby carriages, prams, and its spare parts.

So, these are GST rates applicable to various types of automobiles.

In case you need any sort of guidance with regard to the GST registration, please feel free to contact our business advisors at 8881-069-069.

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