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GST on Vehicle Sale and Spare Parts in India
New vehicles, used vehicles, and spare parts are all taxed differently under GST — and used-vehicle dealers get a margin scheme that most first-time filers miss entirely. SetupFiling.in's CA-assisted team gets your dealership or parts business registered correctly, GSTIN in 24–72 hours.
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Quick Answer: New vehicles attract 28% GST plus a compensation cess that varies by type, while spare parts are mostly taxed at 28% under HSN Chapter 87. Used-vehicle dealers who haven't claimed input tax credit can instead pay GST only on their margin, at a lower rate than new vehicles. SetupFiling.in registers dealerships and parts businesses at ₹999 onwards, GSTIN in 24–72 hours.
Vehicle Sale, Used Cars, and Spare Parts All Follow Different GST Rules
A single automobile business can end up dealing with three separate GST treatments at once. Selling a new vehicle means charging the standard rate plus a compensation cess layered on top. Selling a used or second-hand vehicle can qualify for a special margin scheme, taxing only your profit rather than the full sale value. And spare parts sold at the same counter follow yet another rate entirely, based on their own HSN classification. Mixing these up on an invoice is one of the most common compliance errors in the automobile trade. GST Registration services across India from SetupFiling.in are filed with your actual product mix in mind — new sales, used sales, and parts, correctly separated from day one.
SetupFiling.in is founded by practising Chartered Accountants, Company Secretaries, and Trademark Attorneys with 15+ years of combined experience, and we have already helped 12,000+ entrepreneurs and 50,000+ customers across India register and stay compliant.
GST & Compensation Cess on New Vehicles
| Vehicle Category | GST Rate | Compensation Cess |
|---|---|---|
| Small petrol/diesel cars (below prescribed length & engine capacity) | 28% | Lower slab, typically 1%–3% |
| Larger cars, SUVs & luxury vehicles | 28% | Higher slab, up to 22% |
| Two-wheelers | 28% | Nil or low slab depending on engine capacity |
| Electric vehicles | 5% | Nil |
| Commercial vehicles & tractors | Varies (12%–28%) | Generally nil |
Compensation cess slabs depend on precise engine capacity, vehicle length, and ground clearance, and are revised periodically. Confirm the exact rate and cess applicable to your specific model with our team before pricing an invoice.
The Margin Scheme for Used & Second-Hand Vehicles
Selling a used vehicle doesn't have to mean charging GST on the entire sale price. Under the margin scheme, a dealer who has not claimed Input Tax Credit on the purchase of a used vehicle can pay GST only on the margin — the difference between the selling price and the purchase price (or the depreciated value, for a vehicle held as a business asset). If the margin is negative, no GST is payable on that sale at all.
| Scenario | GST Payable On | Typical Rate |
|---|---|---|
| Dealer claimed ITC on purchase | Full sale value | 28% + applicable cess |
| Dealer did not claim ITC — margin scheme | Margin (selling price minus purchase/depreciated value) | Concessional rate, generally lower than the new-vehicle rate |
| Margin is negative (sold at a loss) | No GST payable on that transaction | Not applicable |
The margin scheme is only available if no input tax credit was claimed on the vehicle's purchase. Confirm eligibility and the current concessional rate for your specific vehicle category with our team.
GST on Automobile Spare Parts
Most automobile spare parts fall under HSN Chapter 87 and are taxed at 28% — the same slab as most complete vehicles. A few specific components, accessories, and consumables like batteries or tyres sometimes fall under separate HSN codes with their own rate, so it's worth confirming classification item by item rather than assuming a flat rate across your entire parts inventory. Getting HSN classification wrong on high-volume parts sales compounds quickly across hundreds of invoices.
Engine & Transmission Parts
Body & Chassis Components
Tyres & Batteries
Electrical & Electronic Parts
Lubricants & Consumables
Accessories & Aftermarket Parts
Choose Your GST Registration Package
Transparent, one-time pricing — no hidden charges. Pick the package that fits your dealership, workshop, or parts business.
Silver Package
Just the GST registration — fast and affordable
₹999/-
- GST Registration Certificate
- GST Portal User ID & Password
- Delivery in 48–72 hours
- ARN tracking included
Gold Package
GST Registration + 6 months of returns
₹3999
₹1999/-
- GST Registration Certificate
- GST Portal User ID & Password
- 6 Months GST return filing
- Delivery in 24 Hours
RECOMMENDED
Premium Package
GST Registration + 12 Month GST Return
₹7398
₹3,699
- GST Registration Certificate
- GST Portal User ID & Password
- 12 Months GST Return Filing
- Delivery in 24 Hours
Who Needs GST Registration — Vehicle and Spare Parts Businesses
- Your annual turnover from vehicle sales, parts, or servicing exceeds ₹40 lakh
- You run a new-vehicle showroom or authorised dealership
- You buy and sell used or second-hand vehicles
- You operate a spare parts retail or wholesale business
- You run a service workshop that also sells parts and consumables
- You supply vehicles or parts to buyers in other states
- You've recently completed a Private Limited Company registration for your dealership
- You voluntarily want to claim input tax credit on inventory and equipment purchases
Documents Required for GST Registration — Automobile Business
- PAN Card of the proprietor / firm / entity
- Aadhaar Card of the proprietor / partners / directors
- Passport-size photograph
- Proof of showroom, yard, or workshop address
- Bank account statement or cancelled cheque
- OEM dealership agreement, if operating as an authorised dealer
- Certificate of Incorporation (for companies) or Partnership Deed
- NOC from property owner, if premises are rented
How to Get GST Registration for a Vehicle or Spare Parts Business — Step by Step
1
Choose your package and place your order
Select Silver, Gold, or Premium above and complete payment securely through secure online payment options.
2
Share your documents and product mix
Send your PAN, Aadhaar, premises proof, and bank details, along with whether you sell new vehicles, used vehicles, spare parts, or a combination.
3
Application filed with correct HSN codes
Our CA/CS team prepares and files your GST REG-01 application with the correct HSN codes across your vehicle and parts categories.
4
ARN generated and tracked
You receive an Application Reference Number (ARN) instantly, and we track its status until approval.
5
GSTIN and certificate delivered
Once approved, your GST Registration Certificate, GSTIN, and GST portal login credentials are emailed to you — ready to invoice new sales, used-vehicle margin sales, and parts correctly.
Benefits of GST Registration for Automobile Businesses
- Use the margin scheme where eligible: Reduce your GST liability on used-vehicle sales to just the profit margin, not the full sale value.
- Claim input tax credit: Offset GST paid on new-vehicle stock, spare parts inventory, and workshop equipment against your output tax.
- Bill fleet and corporate buyers correctly: Corporate and government fleet buyers require GST-compliant invoices to process their own ITC.
- Trade across states: Supply vehicles and parts inter-state without restriction.
- Separate revenue streams cleanly: Correct HSN classification keeps new sales, used sales, and parts revenue clearly reconciled in your returns.
- Avoid penalties: Registering on time avoids interest and late-fee exposure under the CGST Act.
Why Choose SetupFiling.in for Automobile GST Registration?
Automobile businesses that sell new vehicles, used vehicles, and spare parts under one roof need a registration set up to reflect all three revenue streams from day one — not patched together after an incorrect invoice raises questions during a return filing. Our team of Chartered Accountants and Company Secretaries gets the HSN classification and margin-scheme eligibility right at the outset. And compliance doesn't stop at registration: monthly and quarterly GST return filing help, GSTR-3B filing support, updating your GST registration details, and GST registration cancellation process are all handled by the same team.
- 15+ years of combined CA, CS & legal expertise
- 12,000+ businesses and 50,000+ customers served pan-India
- 100% online — no office visits required
- Guidance on margin-scheme eligibility for used vehicles
- Dedicated WhatsApp support for real-time updates
- Fast turnaround — 24 to 72 hour delivery
Related Compliance Services
Automobile businesses often need more than one registration. Explore related services:
Frequently Asked Questions — GST on Vehicle Sale and Spare Parts
What is the GST rate on new vehicles in India?
Most new vehicles attract 28% GST, with an additional compensation cess that varies based on vehicle type, engine capacity, and length. Electric vehicles are taxed at a concessional 5% with no cess.
How is GST calculated on the sale of a used or second-hand vehicle?
If no input tax credit was claimed on the purchase, a dealer can pay GST only on the margin — the difference between the selling price and purchase or depreciated value — at a concessional rate lower than the new-vehicle rate. If the margin is negative, no GST is payable.
What GST rate applies to automobile spare parts?
Most spare parts under HSN Chapter 87 are taxed at 28%, the same rate as most complete vehicles. Some specific components may fall under different HSN codes with their own rate, so classification should be confirmed item by item.
Can a used-car dealer claim input tax credit?
Not if using the margin scheme. The margin scheme is only available when input tax credit has not been claimed on the vehicle's purchase — claiming ITC means GST must be charged on the full sale value instead.
What is the GST registration threshold for a vehicle dealership?
Since vehicles and spare parts are goods, the standard ₹40 lakh threshold applies. Registration is required immediately, regardless of turnover, for inter-state supply.
How much does GST Registration Cost for an automobile business?
GST registration with SetupFiling.in starts at ₹999 for the Silver package. The Gold package (registration + 6 months of returns) costs ₹1,999, and the Premium package (registration + 12 months of returns) costs ₹3,699.
Does compensation cess apply to used vehicles too?
Generally no. Compensation cess is levied on the sale of new vehicles. Used-vehicle sales under the margin scheme are typically taxed at a concessional GST rate without an additional cess, though this should be confirmed for the specific vehicle category.
What documents are required for GST registration for an automobile dealership?
You need PAN, Aadhaar, a passport-size photo, proof of showroom or workshop address, bank account details, and an OEM dealership agreement if operating as an authorised dealer. Companies additionally need a Certificate of Incorporation.
How do I place an order for GST registration for my vehicle or parts business?
Select a package above and click "Place Your Order" to pay securely via Razorpay, or message us on WhatsApp at +91 98182 09246 and our team will guide you through the process.
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