GST on Cars & Vehicles in India (2026): 18% / 40% After GST 2.0
GST 2.0 (September 2025) cut small cars and small bikes from 28% to 18%, while large cars, SUVs and high-capacity motorcycles moved to a 40% slab. Electric vehicles remain at 5%. Here's the full rate map with HSN codes and input-credit rules.
Part of: The Complete GST Guide for Small Business in India (2026)
Vehicle GST saw one of the biggest GST 2.0 changes. From 22 September 2025, small cars and small motorcycles dropped from 28% (plus cess) to a clean 18%, while large cars, SUVs and big bikes sit in the new 40% slab. Electric vehicles stay at a low 5%.
Quick answer: small cars & bikes (≤350cc) = 18%; large cars, SUVs & bikes >350cc = 40%; electric vehicles = 5%.
Vehicle GST rates at a glance
| Vehicle | GST rate | HSN code |
|---|---|---|
| Small petrol/diesel car | 18% | 8703 |
| Large car / SUV / luxury car | 40% | 8703 |
| Motorcycle ≤ 350cc | 18% | 8711 |
| Motorcycle > 350cc | 40% | 8711 |
| Electric vehicle (car/2-wheeler) | 5% | 8703 / 8711 |
| Auto parts & accessories | 18% (most) | 8708 |
What changed under GST 2.0
The old regime layered a 28% base rate plus a compensation cess (1%–22%) on cars, making the effective tax very high on larger vehicles. GST 2.0 folded this into two clear rates: 18% for small/mass-market vehicles and a single 40% for large and luxury ones, removing the separate cess complexity for buyers.
Input tax credit on vehicles
ITC on motor vehicles for passenger transport is generally blocked under Section 17(5), with exceptions — e.g. when the vehicle is used for further supply (a dealer), passenger transport as a service (taxi/fleet), or driving training. Commercial goods vehicles typically allow ITC. Check your specific use with your CA.
FAQs
Is there GST on used cars?
A registered used-car dealer pays GST on the margin (sale minus purchase) rather than the full value under the margin scheme; a sale between two individuals is generally outside GST.
General information only, not tax advice; rates, cess and slabs can change. Confirm the current rate, cess and ITC position for your exact vehicle on CBIC notifications or with your CA. Last reviewed: September 2026.
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