GST On Used Cars: No New Tax Imposed On Sale Of Used Vehicles Including EVs
The transaction will not invite GST if the margin from used vehicle sale is in negative.
The government has not imposed any new tax on sale of used vehicles including electric vehicles, persons privy to the development told NDTV Profit.
The single rate of 18% decided by the GST Council for sale of used vehicles was only aimed at removing ambiguity, as the resale of vehicles earlier attracted different tax rates, the sources clarified.
The goods and services tax, in this case, only applies on business sale and no levy will be charged when a vehicle is sold by one individual to another, the persons said.
The tax will be applicable on the difference between selling price and purchase price of used vehicle, called margin. The transaction will not invite GST if the margin from used vehicle sale is "negative".
The 18% GST is levied on sale of 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.
How It Works
If a registered person sells an old and used vehicle for Rs 10 lakh, while the purchase price was Rs 20 lakh and Rs 8 lakh depreciation was claimed under the Income Tax Act, no GST is required to be paid as the margin (the difference between the selling price of Rs 10 lakh and the depreciated value of Rs 12 lakh, i.e., Rs 20 lakh – Rs 8 lakh) is negative.
However, if the depreciated value remains Rs 12 lakh and the selling price increases to Rs 15 lakh, GST will be applicable on the margin of Rs 3 lakh (Rs 15 lakh minus Rs 12 lakh) at a rate of 18%.
