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Taxes on Buying New Car. Compute Total Tax on Car Cost in India
Taxes Breakup in Buying a Car including GST+ Road Tax + Taxes as Part of Car Ownership. Breakup Composition in Hatch, Sedan, Luxury Cars as Ownership Costs
Taxes on Buying Car in India
Car Ownership is a matter of Joy and Pride for the Car Owner. But - other than it - is also a matter of Joy for Government - as they make Huge Revenue not only at time of Purchase but at Ownership too
Earlier in Pre GST Scenario had multiple taxes
- Excise Duty
- VAT
- Infrastructure Cess
- CENVAT
- Entry Tax / Octroi / LBT
which are are all merged as part of GST - but as a Car Owner its Important to assess in how much Taxes do we pay on buying New Car in India
GST on Buying New Car in India
Below is GST Slab on Buying Internal Combustion Engine Car
| GST + Compensation Cess | Classification |
| 28% + 1% Cess | Sub 4 Meter Petrol Cars under 1.2 Litre engine |
| 28% + 3% Cess | Sub 4 Meter Diesel Cars with Engine < 1.5 Litre |
| 28% + 17% Cess | > 4 Meter Cars with Engine < 2 Litre |
| 28% + 20% Cess | Sedan and SUV Cars above 4 Meter Cars with Engine > 2 Litre and Laden GC< 170 mm |
| 28% + 22% Cess | SUV Cars above 4 Meter Cars with Laden Ground Clearance > 170 mm |
However, if you are buying EV Car - just 5% GST without any Compensation Cess is applicable
See how GST and Cess Calculated on Jeep Compass
This is a quote from Jeep Showroom as extracted when GST Regime was introduced. As can be seen in above quote
- 28% GST is charged equivalent to Rs 3.8 Lakh
- 17% Cess is Charged equivalent to Rs 2.3 Lakh
GST and Cess is Calculated on Base Price of Vehicle (Factory Price + Transit Insurance + Freight + Dealer Margin)
On Face of it, looks like exorbitant tax pf Rs 6.1 Lakh as GST Paid on a Car having Ex-showroom of Rs 19.69 Lakh
Road Tax
Then is Road Tax which is applied on buying Car and goes to State TRansport Department. Road Tax Varies from State to STate.
You can calculate RTO Charges and Road Tax - 
For a Car Like Compass Petrol its Rs 1.96 Lakh as Road Tax which is applied in Delhi. The same may be higher or slight lower in Other States
| Road Tax | 3% to 24% | Based on Vehicle Pricing - Differential in every State |
Positive Side of Taxes Paid on Buying Car
Its Important for a Vehicle Owner also to understand that Taxes are One Time only. Been
- GST is applied on Paying Car as a One Time Payment at time of Buying Car
- Differential Tax is applied. For Budget Cars are Lower Cess as against Higher Cess for Bigger Cars
- Road Tax is Valid for 15 Years (in almost all states except West Bengal having option of 5 Year and 15 Year)
Government uses these Taxes to
- Provide in Infrastructure Support
- Development of Roads, Connecting Highways
- Build Efficient Transport System and share it for benefit of Common Man
- Build India as a Nation to Provide Best in Class Connecting Roads to users
So, even if you pay in say Rs 8 Lakh as all inclusive Tax (Road Tax + GST + Cess) on Jeep Compass as Premium SUV which is what like Valid for 15 Years. it would only imply paying tax of Rs 66000 Annually on a Car and use in all Infrastructure, Roads, Transport System as build by Government
For a Small Car like Maruti Swift Vxi - this all inclusive Tax (Road Tax + GST + Cess) is Rs 2 Lakh which is what valid for 15 years. it would only imply paying tax of Rs 16000 Annually on a Car and use in all Infrastructure, Roads, Transport System as build by Government
So in a way you can be Proud of yourself to be Contributing to Infrastructure Development and Nation Building by buying a Car !!
Taxes as Part of Ownership (Post Purchase)
Component |
Rate |
| Taxes on Petrol (Excise + VAT) | Almost Running to tune of Rs 50 per Litre on Petrol, Diesel |
| GST on Insurance Premium | 18% |
| GST on Labor Charges | 18% |
| GST on Spare Parts - Tyre, Battery, Spare Parts | 28% |
| GST on Loan Foreclosure | 18% |
Comments 14
Being a sub 4 meter petrol vehicle with engine capacity less than 1500cc, Maruti suzuki Brezza falls into which category of GST ? is it 28%GST + 3%cess or 28%GST + 17% cess?
28% GST + 3% Cess
Also after we pay 8 lakh in tax and registration, when its not enough. We can start paying huge traffic challans and proud for contribution in infrastructure development and nation building.
How does tax calculation work when there are exchange bonus and other discount involved. I see difference in Road tax on intial price list and the final road tax receipt. Dealer says it is because of the discount we have given.
I am planning on buying Baleno Zeta variant and my RTO is JAMMU (JK02).
The Ex-Showroom price of the vehicle is 718558 inclusive of GST & CESS. The dealer is charging me around 67000 as RTO fees (which includes HSRP + RTO tax at 9% + Hypothecation).
My question is is it legal for RTO to charge fees on the GST & CESS collected or whether for RTO fees calculation GST & CESS should be excluded.
Haha I had same question it’s tax on taxed amount. I purchased a verna in 2018 and I was surprised to see the actual amount that goes to showroom or company is 7.8L while I paid 16L for it including insurance. So we are paying more than 100% as tax.
We are drowned in tax tax tax...
I found mycarhelpline website and series on YOUTUBE very informative ......even buyers know how much % dealer gets on selling a car......
what a educative initiative sir....keep it up
Superb artucle.....mycarhelpline is best initiative and it is helping people to know all minute thing
Very precise article and informative
politicians eating all the tax money
Good information
Hi,
Can a self employed get some tax treatment for the initial Down Payment required by the car loan vendor?
Regards
Shree
Awesome information about fuel and car taxation... Thanks a lot.