How Much Tax Do You Pay While Buying A Car? Understanding Car Taxes in India
While purchasing a car, buyers face 28% GST, up to 20% cess, and 8-12% road tax.
Tax on a car has always been a talking point as it raises the vehicle’s price considerably. Taxes, especially under the Goods and Services Tax (GST) system, significantly impact the final price. Knowing how these taxes work can help you make an informed decision.
How Much Tax Do You Pay On A Car In India?
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A K Mandhan, a SEBI-registered Research Analyst, has shared insights on social media platform X, highlighting how much tax an individual has to pay to buy a car. He explained that while purchasing a car, buyers face 28% GST, up to 20% cess, and 8-12% road tax.
For instance, the Mahindra Thar, which costs Rs 11.65 lakh ex-showroom, ends up costing Rs 20.60 lakh on-road, with taxes alone amounting to Rs 7.95 lakh.
Purchasing a car in India is the biggest scam.first u earn money and pay tax then
You pay 28% GST + 20% Cess. On top of that on an average 8-12% road tax.
Pre-GST cost of Thar car is 11.65 lakh and on road is around 19.60 lakh.
There is a tax of Rs 7.95 lakh on a car worth… pic.twitter.com/0EHoK77euc
— A K Mandhan (@A_K_Mandhan) March 27, 2025
Mandhan pointed out that middle-class car owners, even those driving a basic Rs 8 lakh car, pay the same price for fuel as luxury car owners driving a BMW or Mercedes. Additionally, they bear expenses like toll tax, fuel, and insurance, without any special benefits.
“Purchasing a car in India is the biggest scam. First, you earn money and pay tax. Then you pay 28% GST + 20% cess. On top of that, there’s an 8-12% road tax. Pre-GST cost of Thar car is 11.65 lakh and on road is around 19.60 lakh. There is a tax of Rs 7.95 lakh on a car worth Rs 11.65 lakh. A middle-class driver pays the same for fuel as a BMW owner, while also covering toll tax, petrol, and insurance," Mandhan said in the post on X.
How GST Affects Car Prices
GST has replaced older taxes like excise duty, VAT, and road tax, making the system more streamlined. The GST rate on cars depends on factors such as:
- Vehicle type (small car, sedan, SUV, etc.)
- Fuel type (petrol, diesel, electric)
- Engine capacity
Most personal and commercial vehicles fall under the 28% GST category, with luxury models attracting additional cess, making them even pricier.
Calculating GST on Cars
To estimate the total tax, use this formula:
Total tax = Ex-showroom price × (GST rate + cess rate)
Mandhan shared the price calculation of Mahindra Thar with an ex-showroom price of Rs 11,65,000. On this, you pay:
28% GST = Rs 3,26,000
1% TCS = Rs 17,240
20% Cess = Rs 2,33,000
Road Tax = Rs 2,19,000
Insurance = Nearly Rs 1,00,000
Final price = Rs 20,60,240.
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