GST On Cars/four-wheelers In 2022: Check Tax Rates & HSN Codes Here!

Many indirect taxes in India have been replaced by the Goods and Services Tax (GST). These indirect taxes that GST has replaced were complex. Such complex taxes are service tax, Value Added Tax (VAT), Excise Duty, etc. As such, GST is a very comprehensive tax. The automobile industry has been considerably affected by GST.

The automobile industry is a vast sector in India. The massive number of cars produced by the industry has a very significant impact on the lives of many Indians. Any tax on cars would affect a large Indian population.

Let us go through this topic in detail to understand the GST on cars in 2022. You can also check out the various tax rates for cars/four-wheelers here.

Tax Laws on Cars/Four-Wheelers Before GST

Below is a table that shows the different types and rates of taxes levied on the passenger vehicles/SUV before GST.

Parameter	Small Cars <1200cc	Mid-Size Cars from 1200cc to 1500cc	Luxury Cars>1500cc	SUV’s >1500cc, >170mm ground clearance
Excise	12.50%	24%	27%	30%
NCCD + auto cess	1.1%	1.1%	1.1%	1.1%
VAT	14%	14%	14%	14%
Road Tax	State-Based	State-Based	State-Based	State-Based
Motor Vehicle Tax	State-Based	State-Based	State-Based	State-Based
Total	28% (Approximately)	39%	42%	45%
CGST	9%	9%	14%	14%
SGST	9%	9%	14%	14%
Total	18%	18%	28%	28%
Difference	10%	21%	14%	17%

Previously, sales of used cars were subject to the Value Added Tax. Furthermore, there was no application of Excise Duty, VAT, or Composite Rate in some states on the advance received for supply of goods. Many Indian states provided the manufacturers of original equipment or components with different investment-linked incentive schemes.

Interest-free loans, VAT/CST, and subsidies are the two main components of this scheme. There was the exemption of sale of goods and services, without consideration, from Service Tax and Value Added Tax.

GST on Automobile Industry

VAT and Excise were the two taxes that the end consumer of cars had to pay previously. This was with an average combined rate ranging from 26.50% to 44%. This certainly exceeds the rates of 18% and 28% under GST. Consequently, there has been a reduction of the financial pressure of tax on the end consumer, thanks to GST.

Import dealers can also be happy as it will now be possible for them to claim the GST paid on goods whose importation or selling takes place. Previously, the import dealers were unable to claim the Value Added Tax and Excise Duty paid.

Covering the excise payable on stock transfer by IGST will now be possible under the GST law. Taxation of advance received for the supply of goods will now be subject to the rules of GST.

Manufacturers would be able to procure auto parts at a cheaper cost, thanks to the GST on cars. This is because of the improvement of the supply chain mechanism due to the effect of GST on vehicles.

Also Read: Car Brands in India

GST Rates on cars/four wheelers

Below are the GST rates that will help you to understand the GST on cars.

Vehicle Description	Rate of GST	Cess
Motor vehicles for transportation that are not for carrying more than 13 persons, including the driver		15%
Motor vehicles, three-wheelers and vehicles of 1200cc engine capacity and 4000 mm length		15%
Vehicles that use compressed natural gas (CNG), liquefied petroleum gas (LPG), or petrol, driven motor vehicles of length that does not exceed 4000mm and engine capacity that is not over 1200 cc	18%	1%
Diesel driven motor vehicles of length that are not in excess of 4000mm and engine capacity that is not in a lot of 1500cc	18%	3%
Motor vehicles of engine capacity that is not more than 1500 cc		17%
Motor vehicles of engine capacity that is more than 1500 cc		20%
Motor vehicles of engine capacity which is more than 1500cc, known as SUVs popularly, utility vehicles included		22%
All old and used electric vehicles, motor vehicles, and vehicles whose clearance takes place as ambulances		Nil
Motor vehicles that refrigeration units.	18%
Motor vehicles are for special purposes.	18%
Motor vehicles for transportation. They can carry ten individuals or more than this amount, inclusive of the driver. The exception here is of buses whose use takes place for public transportation.	28%
Motor cars and other motor vehicles are mainly for passenger transportation, except those whose mention has taken place above, including racing cars and station wagons and racing cars, and cars for physically disabled persons.	28%
Goods transport vehicle that is unlike the vehicles with refrigeration units.	28%

GST will be quite advantageous for the people who go for small family cars. Such cars are like Nano, Datsun Go, Alto, Santro, etc. This is because there shall be a charging of minimum cess of 1% over the 18% rate of GST.

Car manufacturers offer plenty of free services or warranties to customers. They do this to woo customers because the automobile industry is very competitive. These free services were not subject to taxation under the previous tax regime. Under GST, there shall be the application of taxation on such free services offered by car manufacturers.

We hope our article turned out to be useful for you. For more such informative content, you can visit these linked articles as well:
GST on Mobile Phones in 2022	GST rates on Medicines in 2022	GST on Small Retailers
GST on Food items	GST on Real Estate	GST on the logistics sector

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FAQs

Q. On what factors do GST on cars/four wheelers depends?

Ans. GST on cars depends on three main factors. These factors are cars usage, fuel type, and classification of cars.

Q. Is cess also levied on cars along with GST?

Ans. Yes, cess is also levied on cars/four-wheelers along with the standard GST rate. The factors on which cess depends are the category of car and engine capacity of the car. The rate of cess on cars varies between 1% and 15%.

Q. Who is affected by the GST on cars/four-wheelers in India?

Ans. GST on cars will be on consumers, manufacturers of vehicles, car dealers, and exporters.