GST Rate on Auto Components in India: 28% vs 18% vs 5% — Which Rate Applies?

A brake-system manufacturer in Pithampur ships a single tax invoice to a passenger-car OEM for a complete front-axle braking set: cast-iron disc rotor, organic brake pad, friction lining, a wheel-hub bearing assembly, and the assembly service performed on a programme-dedicated line at the OEM’s plant. One invoice; four different GST rates; one wrong classification and the invoice gets queried at OEM goods-receipt and again at the OEM’s GSTR-2B reconciliation. The disc rotor is a 28% line under HSN 8708, the bearing is an 18% line under HSN 8482, the brake pad and lining are 28% under HSN 8708, the assembly service is 18% under HSN 9988. This is GST rate auto component India in one invoice — a structure where the most-specific HSN rule, the GST Council notification history, and the line-level rate split together decide whether the invoice clears or sits in dispute.

Quick reference

The structure of the rate map

The GST rate that applies to an auto component is decided by the HSN heading the goods fall under, not by the use to which they are put. That single point is the source of most rate disputes in the industry, because many components have both an automotive heading (HSN 8708 at 28%) and a more specific heading at 18% available to them — and the classification rule under the GST tariff requires the most specific heading to be used first (General Interpretative Rule 3(a)). The residual heading 8708 is reached only when no more specific heading applies.

The result is a three-tier rate map for the auto industry:

• 28% on residual motor-vehicle parts under HSN 8708 — the bulk of the industry by value
• 18% on specific component categories that have their own electrical, mechanical or chemical heading
• 5% on electric vehicles and EV chargers under headings 8703, 8704 and 8504, by virtue of the 2019 concessional notification

Layered on top sits the 18% rate on services — job-work, assembly, machining, design — under HSN 9988 / 998311. This is the rate that touches every Section 143 reconciliation flow, because the conversion charge in every plating / heat-treatment / machining contract is a service under HSN 9988 (see Tier-2 sub-vendor job-work reconciliation).

What goes at 28% under HSN 8708

HSN 8708 is the catch-all for “parts and accessories of the motor vehicles of headings 8701 to 8705”. In practice it pulls in the bulk of the engineered components an OEM buys from its supplier base:

• Brakes and brake parts — disc rotors, drums, callipers, pads, linings, master cylinders, brake hoses
• Transmission components — gearboxes (as parts), gears, propeller shafts, drive shafts and shafts and CV joints, clutches and clutch parts
• Suspension — shock absorbers, suspension arms, leaf and coil springs, stabilising bars
• Steering — steering wheels, columns, steering boxes, racks
• Body and chassis parts — bumpers, body panels (doors, hoods, fenders), frames and frame parts, fuel tanks, radiators (as motor-vehicle parts), silencers and exhaust pipes
• Wheels — road wheels, hub caps, axles when supplied as parts

All of these have been at 28% since 1 July 2017 and have not been touched by any subsequent rate-cut notification. The reason the GST Council has not moved 8708 lower is structural: it would create a large revenue hit across the largest manufacturing GST head in the country, with limited consumer-welfare argument given that most 8708 supplies are B2B.

What sits at 18% under specific headings

A series of headings cut into HSN 8708’s residual scope and pull components down to 18%:

Bearings — HSN 8482 (18%). Ball, roller and needle bearings have their own heading and are taxed under it, not under 8708. A wheel-hub bearing assembly, however, can be a classification edge case — when bundled into a hub-with-bearing assembly that is identifiable as a motor-vehicle part, it can drift back to 8708 at 28%. The conservative practice is to invoice the bearing separately at 8482 where the contract permits.

Lead-acid batteries — HSN 8507 (18%). Standard 12V SLI automotive batteries sit here. The 2018 rate review reduced lithium-ion batteries from 28% to 18% to align with the broader battery rate, which is now relevant for hybrid and electric platforms.

Ignition equipment, starter motors, generators — HSN 8511 (18%). Spark plugs, ignition coils, distributors, starters and alternators all sit at 18% as electrical machinery rather than at 28% as motor-vehicle parts.

Vehicle lighting — HSN 8512 (18%). Headlamps, tail lamps, fog lamps, indicators, dashboard lighting.

Wiring harnesses and ECUs — classification is split. A wiring harness can be classified under HSN 8544 (insulated wire) at 18% or under HSN 8708 at 28% depending on whether it is supplied as a length of wire or as a motor-vehicle-specific harness assembly. ECUs and electronic control modules under HSN 8537 / 8543 typically sit at 18%.

Tyres — split. Tyres for passenger cars under HSN 4011 attract 28%. Tyres for tractors and some off-road vehicles attract 12% under specific sub-headings.

The classification logic is consistent: a component is taxed under its most specific heading, and only when no more specific heading applies does it fall back to HSN 8708 at 28%.

The 5% concessional rate on EVs

By Notification 12/2019-Central Tax (Rate) dated 31 July 2019 with effect from 1 August 2019, the GST Council reduced the rate on electric vehicles from 12% to 5%. The concession covers:

• Electrically-operated motor vehicles for passenger transport under HSN 8703
• Electrically-operated motor vehicles for goods carriage under HSN 8704
• Chargers and charging stations for electric vehicles under HSN 8504

The rate applies to the completely-built electric vehicle and to chargers — it does not extend automatically to every EV-specific part. An electric drive motor, a power-electronics module, a battery management system, when supplied as parts identifiable for an EV motor vehicle, generally follow either HSN 8708 at 28% (if treated as motor-vehicle parts) or the relevant electrical heading at 18% (if treated as electrical machinery). This is the active classification dispute area in the EV component ecosystem, and the GST Council has periodically issued clarifications.

EV batteries under HSN 8507 60 sit at 18% — the 5% does not extend to the battery as a separately-supplied component, which is a known structural friction in the EV cost stack that industry bodies regularly raise with the Council.

The 18% rate on services — HSN 9988 and the job-work rail

Every reconciliation flow that touches Section 143 — plating, heat-treatment, machining, painting, anodising, phosphating, assembly — is a service under Schedule II of the CGST Act, classified under HSN 9988 (“manufacturing services on physical inputs owned by others”) and taxed at 18% on the conversion charge. The inputs themselves move GST-free on a Rule 55 delivery challan under Section 143; only the conversion service carries the rate.

Engineering design services (CAD design, prototype development) sit at HSN 998311 at 18%. Pure transport services on auto-component cargo follow their own rate map under HSN 9965 — typically 5% on goods-transport-agency services with no ITC for the recipient, or 12% with ITC.

The 18% rate on HSN 9988 is the rate that travels through every ITC-04 filing cycle on the supplier-tier-2 leg, and through every free-issue steel and skeleton scrap reconciliation where the supplier bills only its pressing service on OEM-owned steel.

GST Council notification history — what changed when

The auto rate map has been remarkably stable on the goods side. The substantive changes were:

• 1 July 2017 — opening rate schedule. HSN 8708 at 28%; HSN 8482 at 18%; HSN 8511, 8512 at 18%; HSN 8507 lead-acid at 28%; HSN 8507 60 lithium-ion at 28%; EVs at 12%.
• 27 July 2018 — 28th GST Council meeting. Lithium-ion batteries (HSN 8507 60) reduced from 28% to 18%, aligning with the broader battery heading.
• 1 August 2019 — Notification 12/2019-CTR. EVs (HSN 8703 / 8704) reduced from 12% to 5%; EV chargers (HSN 8504) reduced to 5%.
• 2021 onward — periodic clarifications on EV-component classification (motor controllers, BMS, drive units) where the dispute between residual HSN 8708 (28%) and specific electrical heading (18%) remained live.
• 2024 — Council further refinements on EV-charger and lithium-ion classification, plus separate clarifications on certain electronic auto sub-systems.

For reconciliation purposes the practical implication is that a cross-period invoice or a supplementary invoice raised retrospectively for a period before a rate change must use the rate that was in force at the original time-of-supply, not the current rate. Section 14 of the CGST Act governs the time-of-supply rule when rates change. This is the source of many of the rate-history disputes in long-tail OEM supplier audits.

Section 9(5) and the aftermarket platform question

Section 9(5) of the CGST Act empowers the government to notify categories of services where the electronic-commerce operator (ECO) pays the GST on behalf of the underlying supplier. The current Section 9(5) notifications cover transport-by-radio-taxi, accommodation, housekeeping and (from 2022) restaurant services through ECOs. Section 9(5) does not cover physical goods such as auto-spare-parts.

So when an aftermarket spare-parts marketplace lists a spare from an independent seller:

• The seller raises a tax invoice on the buyer with GST at the correct rate (typically 28% on HSN 8708 spare-parts).
• The ECO marketplace does not pay output GST on behalf of the seller — the seller pays its own output GST.
• The ECO marketplace separately deducts Section 52 TCS at 1% on the net taxable value of the supply, remits it to the credit of the seller, and the seller claims it through the auto-populated GSTR-2A / 2B.

Reconciliation must therefore tie three things for any marketplace seller: the seller’s GSTR-1 outward supplies for the period, the marketplace’s GSTR-8 statement showing Section 52 TCS credit, and the bank settlement from the marketplace (which arrives net of 1% TCS and the marketplace’s own commission, on which the seller has separately discharged GST under reverse charge or has been billed by the marketplace).

Worked example — a brake-system supplier billing mixed-rate components

A Tier-1 brake-system supplier in Pithampur ships to a passenger-car OEM in Pune. The April invoice covers a single front-axle braking set per vehicle, across 12,000 vehicles’ worth of supply:

• Cast-iron disc rotor (HSN 8708 30 00, motor-vehicle brake part) — 12,000 units × ₹620 = ₹74.40 lakh — 28%
• Organic brake pad set (HSN 8708 30 00) — 12,000 sets × ₹180 = ₹21.60 lakh — 28%
• Friction lining material (HSN 8708 30 00) — 12,000 × ₹95 = ₹11.40 lakh — 28%
• Wheel-hub bearing assembly (HSN 8482 10 20, billed separately on a contract that classifies the bearing under its own heading) — 12,000 × ₹340 = ₹40.80 lakh — 18%
• Brake-set assembly service (HSN 9988, performed on a programme-dedicated line at the OEM plant) — 12,000 × ₹65 = ₹7.80 lakh — 18%

The invoice tax computation:

• 28% lines: 74.40 + 21.60 + 11.40 = ₹107.40 lakh taxable — GST at 28% = ₹30.07 lakh
• 18% lines: 40.80 + 7.80 = ₹48.60 lakh taxable — GST at 18% = ₹8.75 lakh
• Total invoice taxable value: ₹156.00 lakh; total GST: ₹38.82 lakh; grand total: ₹194.82 lakh

The OEM’s accounts-payable system reconciles the invoice line-by-line against the purchase order, validates each line’s HSN against the supplier’s GSTR-1, runs the GSTR-2B match, and books ITC at the correct rate per line. A wrong classification on any line — say the bearing classified at 28% instead of 18% — over-bills GST, denies the OEM the saved tax, and gets the line query at month-end. A right classification cleared at first pass clears the invoice through the OEM’s three-way match and into the next payment cycle. The OEM may also deduct TDS at the appropriate rate on the supplier payment — for the goods portion under Section 393(1)(k) at code 1012, and on any separately-billed service portion under Section 393(1)(a) at code 1002 — independently of GST. The relevant new-Act payment-code map is in TDS payment codes 1001–1092 and the wider framework in Section 393 TDS under the new Income Tax Act.

How the GST rate map ties into the wider auto stack

The rate map is the foundation under every auto reconciliation rail: the 28% on residual HSN 8708 sits under the automotive component manufacturing reconciliation sub-pillar; the 18% on HSN 9988 runs through every Tier-2 sub-vendor job-work reconciliation leg; the 18% on the Schedule II service treatment is what makes free-issue steel and skeleton scrap reconciliation work as a pure-service supplier billing. For the consolidated HSN rate schedule and the GST Council notification archive see the GST portal.

What automated reconciliation changes

Multi-rate line-level classification on tens of thousands of invoice lines a month is where rate-misclassification disputes hide until OEM GSTR-2B reconciliation queries them — by which time the dispute window is open and the working-capital impact is real. Purpose-built reconciliation software India carries an HSN-to-rate master per part number, validates line-level GST against the source GST Council notification, ties each line into GSTR-1 and into the OEM’s GSTR-2B for invoice clearing, and reconciles Section 52 TCS credits from any marketplace channel. TransactIG carries 24+ industry presets including a configuration for HSN-to-rate mapping across auto-component, electrical and EV supplies. Customer outcomes include match-rate improvement from 51% to 88%. Build is two-to-four weeks on AWS Mumbai (ISO 27001:2022). For the inbound match discipline see three-way matching software India.