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GST on Sale of Used Car

GST on Used Car

With the implementation of GST, tax applicable on sale of old and used vehicles was the same as on new vehicles – 28% + Applicable cess at the rate of 15% – this resulted in a rate of up to 43% being charged on the sale of old vehicles. The used car market was heavily affected with this high rate of tax being charged causing a burden on trade and industries. Since almost two years from date of implementation of GST, there are various confusions regarding rate of tax applicable on supply of motor vehicles.

The New GST Rates are as Follows:-

Sr. No.GST RatesDescription
1.18%Old & used vehicles petrol, Liquefied Petroleum Gas (LPG) or Compressed Natural Gas (CNG), with engine capacity – 1200cc or more and is of 4000mm or more in length.
2.18%Old and used motors vehicles with an engine capacity that exceeds 1500cc or more and is of a length of 4000mm.
3.18%Old & used motor vehicles that fall under the category of Sports Utility Vehicles (SUVs) and have an engine capacity exceeding 1500cc.

This would a relaxation to the persons dealing in the buying & selling of motor vehicles. Although, it would also help diminish the impact for a registered person who is selling the motor vehicle being a fixed asset. The government, in the Notification No. 1/2018 – Compensation Cess Rate, states that it exempts the cess applicable on sale of used & old motor vehicles.

Conditions For Claiming Such Rates & Exemptions:

Where depreciation claimed under Income tax, margin shall be counted as consideration received (-) depreciated value of goods as on date of supply. Here, it is important key point to note, that although Income Tax required depreciation to be calculated on the asset block, the rate is required to be applied for the specific motor vehicle, up to the date the supply.

The credits under Goods and Services Tax or previous laws have not been claimed. (GST, VAT, ED, ST)