GST Rate Increase on Old and Used Vehicles

The Goods and Service Tax (GST) Council has decided to levy a uniform 18% tax on the margin value of the sale of all used cars by businesses, including electric vehicles. However, the sale and purchase of used cars by individuals continue to be expected from GST.

Current GST Structure For Used Car Sales By Businesses

At the moment, businesses selling used cars attract a 12% GST. This applies to petrol models with engine capacity of less than 1200cc and lengths less than 4000mm and diesel vehicles with engine capacity of less than 1500cc and lengths less than 4000mm. Used petrol models with engine capacity higher than 1200cc and length more than 4000mm and diesel models with engine capacity higher than 1500cc and length more than 4000mm already attract an 18% GST. Up until now, used electric vehicles also attracted a 12% GST.

New GST Rates On Sales Of Used Cars By Businesses

• Scope of GST Rate Hike
  • The 18% GST rate will apply to all old and used vehicles, including EVs, except for the following categories already taxed at 18%:
    • Petrol Vehicles: Engine capacity of 1200 cc or more and length of 4000 mm or more.
    • Diesel Vehicles: Engine capacity of 1500 cc or more and length of 4000 mm or more.
    • SUVs (Sports Utility Vehicles).
• GST Applicability Basis
  • GST will be applied only on the margin of the supplier, which represents the difference between:
    • The purchase price of the vehicle.
    • The selling price (depreciated value if depreciation has been claimed).
  • GST will not apply to the entire value of the vehicle.
• Exclusions from Applicability
  • The increased GST rate does not apply to transactions involving unregistered persons, ensuring relief for individual sellers not registered under GST.

According to the changes made by the GST council, all used vehicles, irrespective of their engine capacities and length, will attract a uniform 18% tax. This is also applicable to used electric vehicles.

This tax will be applicable only to the value that represents margin, which is the difference between businesses’ purchase price and selling price (depreciated value if depreciation is claimed).