Welcome to Mycarhelpline Community Blog

Taxes on Buying New Car. Compute Total Tax on Car Cost in India

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 in Buying New Car

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 

 

GST on Buying Car

GST 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

See how GST and Cess Calculated on Jeep Compass

This is a quote from Authorized Jeep Showroom. 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 - Car Loan EMI Calculator

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%
Jeep Compass Accessories Prices. Compass Modificat...
Honda City VMT Vs. Vx, Zx 2020 Model Differences, ...

Important: If you seek advise or recommendation, pls raise query in Car Forum instead of posting in comments

 

Comments 5

Guest - rahul aggarwal on Wednesday, 11 December 2019 06:49

Very precise article and informative

Very precise article and informative
Guest - Anon on Thursday, 14 February 2019 22:18

politicians eating all the tax money

politicians eating all the tax money
Guest - Arnaab on Thursday, 19 April 2018 16:55

Good information

Good information
Guest - Shree on Sunday, 03 December 2017 09:44

Hi,
Can a self employed get some tax treatment for the initial Down Payment required by the car loan vendor?
Regards
Shree

Hi, Can a self employed get some tax treatment for the initial Down Payment required by the car loan vendor? Regards Shree
Guest - Karthik Kanthimath on Tuesday, 12 September 2017 01:33

Awesome information about fuel and car taxation... Thanks a lot.

Awesome information about fuel and car taxation... Thanks a lot.
Guest
Thursday, 06 August 2020

Captcha Image