Compensation cess is a type of charge levied on certain goods in addition to the applicable GST and it was introduced as part of the GST Act. Compensation cess is currently applicable to some key goods such as:
Below Table summarises GST+Compensation Cess on cars in India.
| Type of Vehicle | GST Rate | Compensation Cess | Total Total Tax Payable |
| Petrol/CNG/LPG car less than 1200cc and length less than 4 meters | 28% | 1% | 29% |
| Petrol/CNG/LPG car less than 1200cc and length more than 4 meters | 28% | 15% | 43% |
| Petrol/CNG/LPG car over 1200cc (irrespective of length) | 28% | 22% | 50% |
| Diesel car less than 1500cc and length less than 4 meters | 28% | 3% | 31% |
| Diesel car less than 1500cc and length more than 4 meters | 28% | 20% | 48% |
| Diesel car over 1500cc engine capacity, greater than 4 meters length and ground clearance of 170mm or more | 28% | 22% | 50% |
| Electric Cars (all sizes including 2 and 3 wheelers) | 12% | Nil | 12% |
| Vehicles fitted for use as an ambulance | 28% | Nil | 28% |
| Three wheeler motorized vehicles | 28% | Nil | 28% |
| Fuel Cell Vehicles including hydrogen fuel cell vehicles | 12% | Nil | 12% |
| Motorcycles/mopeds with engine capacity of up to 350cc | 28% | Nil | 28% |
| Motorcycles with engine capacity greater than 350cc | 28% | 3% | 31% |
The vehicle specifications are as per the Motor Vehicle Act, 1988. The rates are liable to periodic change and list is not exhaustive.
Note that diesel vehicles with large engine capacities have the highest compensation cess and by extension the highest tax rates applicable to them. Simultaneously, cars with smaller engines and those driven by cleaner technologies such as electric/fuel cell feature a lower rate of compensation cess.
Also read:-
EbizFiling.com is a motivated and progressive firm managed by like-minded people. It helps a variety of small, medium and large businesses to cater to all compliance requirements of Indian Laws.
Get in touch for a free consultation on info@ebizfiling.com or call 9643203209.
80G & 12A Registration Rules in India Introduction In India, non-profit organisations can register under 12A to get income tax…
What if You Don't File LLP Returns for 3 Years? Introduction LLP annual filing in India may seem like a…
Realistic LLC Formation Costs in the US for Indian Entrepreneurs Introduction Starting an LLC in the US as an Indian…
LLC Annual Compliance: Mistakes Indian Entrepreneurs Commonly Make in the US Introduction Starting an LLC and registering it with the…
LLC Benefits in the US That Indian Companies Often Overlook Introduction Starting a business in the United States is a…
Compliance Calendar for the Month of August 2025 As we step into August 2025, it’s important for businesses, professionals, and…
Leave a Comment