What is the GST on a car under 4 metres?

18%, if the engine is up to 1,200cc for petrol, CNG or LPG, or up to 1,500cc for diesel. A car under 4 metres with a bigger engine pays 40%.

Is compensation cess still charged on cars?

No. From 22 September 2025 the cess on vehicles was removed and replaced by a single rate of 18% or 40%.

What is the GST on electric cars and scooters?

5%, unchanged by GST 2.0, whatever the size of the vehicle.

Is GST charged on road tax and registration?

No. Road tax and registration fees are state levies paid at the RTO. GST applies to the vehicle price, insurance and accessories.

Do I pay GST when I sell my old car?

Not if you are an individual selling your own car. A registered dealer pays 18% on its margin.

GST on cars and bikes after GST 2.0

Updated 11 October 2026

Since 22 September 2025, small cars and motorcycles up to 350cc carry 18% GST, while bigger cars and motorcycles above 350cc carry 40%. The compensation cess that used to sit on top of the old 28% rate is gone, and electric vehicles stay at 5%. For most buyers, the total tax on a new vehicle fell.

GST on vehicles before and after 22 September 2025

Vehicle	Before (GST + cess)	Now
Small petrol, CNG or LPG car (up to 1,200cc and 4 metres)	28% + 1% = 29%	18%
Small diesel car (up to 1,500cc and 4 metres)	28% + 3% = 31%	18%
Hybrid within the same small-car limits	28%	18%
Other cars with engines up to 1,500cc	28% + 17% = 45%	40%
Cars with engines above 1,500cc	28% + 20% = 48%	40%
SUVs (over 4 metres, over 1,500cc, ground clearance 170mm or more)	28% + 22% = 50%	40%
Larger hybrids	28% + 15% = 43%	40%
Electric cars, scooters and bikes	5%	5%
Motorcycles and scooters up to 350cc	28%	18%
Motorcycles above 350cc	28% + 3% = 31%	40%
Three-wheelers, buses, trucks and ambulances	28% (plus cess on some)	18%
Tractors	12%	5%
Bicycles	12%	5%
Auto parts	18% or 28%	18%

Source: recommendations of the 56th GST Council, put into effect from 22 September 2025.

What counts as a small car

A car gets the 18% rate only if it meets both limits: length up to 4,000mm, and engine up to 1,200cc for petrol, CNG or LPG or up to 1,500cc for diesel. A compact SUV just under 4 metres with a 1.2 litre petrol engine qualifies. The same body with a 1.5 litre petrol engine, or any car longer than 4 metres, falls in the 40% bracket. Motorcycles split at 350cc: a 349cc bike pays 18%, while a 450cc or 650cc bike pays 40%.

Why big cars also got cheaper

Before September 2025, cars carried 28% GST plus a compensation cess of 1% to 22%, so a large SUV paid 50% in all. GST 2.0 replaced the cess with a single 40% rate, and the compensation cess on vehicles ended on 22 September 2025. That is why the total tax on most big cars dropped by 3 to 10 percentage points, while bikes above 350cc became costlier, moving from 31% to 40%.

Worked example. Assume the maker's pre-tax price is unchanged and the whole tax change reaches the buyer.
Small petrol hatchback, pre-tax price ₹6,00,000: before, 29% tax of ₹1,74,000 made it ₹7,74,000. Now 18% is ₹1,08,000, so it costs ₹7,08,000, a saving of ₹66,000.
Large SUV, pre-tax ₹20,00,000: before, 50% (₹10,00,000) made it ₹30,00,000. Now 40% (₹8,00,000) makes it ₹28,00,000, a saving of ₹2,00,000.
350cc motorcycle, pre-tax ₹1,60,000: before, 28% (₹44,800) gave ₹2,04,800. Now 18% (₹28,800) gives ₹1,88,800, a saving of ₹16,000.
650cc motorcycle, pre-tax ₹2,50,000: before, 31% (₹77,500) gave ₹3,27,500. Now 40% (₹1,00,000) gives ₹3,50,000, which is ₹22,500 more.

What GST covers in the on-road price

Ex-showroom price: includes the GST in the table above.
Road tax and registration: state charges collected by the RTO, with no GST on them.
Motor insurance: 18% GST on both third-party and own-damage premium. The September 2025 exemption covers only individual life and health insurance (see GST on insurance).
Accessories, extended warranty, servicing and spare parts: 18%.

Used cars and bikes

If you sell your own car to another person, no GST applies, because you are not doing business. A registered used-car dealer pays 18% only on its margin (selling price minus purchase price), and nothing if the car is sold at a loss. This single 18% margin rate has applied to all used vehicles, EVs included, since January 2025, and GST 2.0 did not change it. On 8 October 2026 the GST Council recommended letting margin-scheme dealers claim input tax credit on costs such as spares, repairs and rent, though not on the vehicles they buy; that applies once notified.

Can a business claim input tax credit on a car?

Usually not. Under the GST law, credit is blocked on vehicles that carry up to 13 people (driver included), which covers cars and bikes, unless the vehicle is used for further sale, for carrying passengers as a business, or for driving training. Trucks and other goods carriers are not blocked. See input tax credit for the general rules, and use the GST calculator to split a vehicle price into its pre-tax value and GST.