GST Council Meet: Profit Margin Of Used Car Sale To Attract Higher Tax For Dealers

The 55th GST Council meeting on Saturday recommended to harmonise the GST rate on the margin value of the sale of old and used vehicles including electric vehicles at 18%.

No tax will be levied when a used EV is sold by the owner to another indivdual. However, registered businesses dealing with resale of cars will be liable to pay 18% on margin value, from the current 12%.

Margin value is the difference between the purchase price and selling price. So if a car is purchased for Rs 10 lakh and sold for Rs 7 lakh, the margin value which will attract tax will be Rs 3 lakh.

The hike will bring used and old smaller cars and EVs at par with old larger vehicles.

Currently, old and used petrol vehicles of engine capacity of 1,200 cc or more and of length of 4,000 mm or more, diesel vehicles of engine capacity of 1,500 cc or more and of length of 4,000 mm and SUVs attract 18%.

The tax is applicable only when such vehicles are sold with margin and when businesses buy them and claim depreciation.

The GST Council meeting was chaired by Union Finance Minster Nirmala Sitharaman and comprised her state counterparts in Jaisalmer on Saturday. Several proposals of the Fitment Committee, comprising officials from the Centre and states' GST department, came up for review before the Council.