If you are planning to buy or sell a second-hand car in India, you might be wondering how GST will affect your transaction. GST, or Goods and Services Tax, is a comprehensive indirect tax that subsumes various taxes such as excise duty, VAT, service tax, etc. GST was implemented in India from July 1, 2017, with the aim of creating a uniform tax system and reducing tax evasion.
GST has different rates for different categories of goods and services, ranging from 0% to 28%. For motor vehicles, including personal or commercial vehicles, the GST rate is 28%. However, this rate is applicable only for new vehicles or vehicles imported from outside India. For second-hand vehicles, the GST rate and valuation depend on various factors such as the type of vehicle, the engine capacity, the length, the ground clearance, the depreciation claimed, and the status of the buyer and seller.
In this blog post, we will discuss the GST implications on the sale of second-hand cars in India, based on the latest notifications and rulings issued by the GST authorities.
GST on sale of Second-Hand Cars by Dealers ?
If you are buying or selling a second-hand car through a dealer who is registered under GST, then you need to pay attention to the following points:
- The Dealer has to change GST on the sale of second-hand cars as per Notification No.8/2018- Central Tax (Rate) dated 25-01-2018.
- The GST rate for second-hand cars is based on the engine capacity and the length of the vehicle. The table below shows the GST rate for different types of second-hand cars.
| Sl. No | Chapter, Heading, Subheading or Tariff Item | Description of Goods | Rate |
| 1 | 8703 | Old and Used, Petrol Liquefied petroleum gases (LPG) or Compressed natural gas (CNG) driven motor vehicles of engine Capacity of 1200 CC or more and of length of 4000 mm or more | 18% |
| 2 | 8703 | Old and Used, diesel driven motor vehicles of engine capacity of 1500 CC or more and of length of 4000 mm | 18% |
| 3 | 8703 | Old and Used, Motor Vehicles of engine capacity exceeding 1500 CC, Popularly known as sports Utility Vehicles (SUVs) including utility vehicles | 18% |
| 4 | 87 | All Old and used vehicles other than those mentioned from Sl. No 1 to Sl. No 3 | 12% |
- The Dealer has to pay GST on the margin or difference between the selling price and the purchase price of the second-hand car. If the margin is negative, i.e., the selling price is lower than the purchase price, then no GST is payable.
- The Dealer cannot avail input tax credit (ITC) on the purchase of second-hand cars, as it is blocked under section 17(5) of the CGST Act, 2017.
- The Dealer has to issue a tax invoice for the sale of second-hand cars, showing the GST amount separately.
- The Dealer has to file monthly GST returns (GSTR-1 and GSTR-3B) and pay GST accordingly.
GST on sale of Second-Hand Cars by Individuals ?
If you are buying or selling a second-hand car as an Individual who is not registered under GST, then you need to ay attention to the following points:
- No GST is applicable on the sale of second-hand cars by individuals in India. This is because such transaction are not considered as "Supply " under GST law, as per schedule III of the CGST Act, 2017.
- The Buyer and Seller do hot have to charge or pay any GST on the transaction value of the Second-hand Car.
- The Buyer and Seller do not have to issue any tax invoice or bill of sale for the transaction.
- The Buyer and seller do not have to file any GST returns or pay any GST.
However, if you are an Individual who has claimed depreciation on the second-hand car under Section 32 of the Income Tax Act, 1961, then you need to pay attention to the following points:
- You have to charge GST on the sale of second-hand cars as per Notification No. 8/2018-Central Tax (Rate) dated 25-1-2018.
- The GST rate for second-hand cars is based on the engine capacity and the length of the vehicle, as shown in the table above.
- The value for GST calculation is the difference between the sale value and the depreciated value of the second hand cars on the date of sale. If the difference is negative, i.e., the sale value is lower than the depreciated value, then NO GST is payable.
- You have to issue a tax invoice for the sale of second-hand cars, showing the GST amount separately.
- You have to register under GST as a casual taxable person and file the GST return (GSTR-1 and GSTR-3B) and pay GST accordingly.
GST has brought some changes in the taxation of second-hand cars in India. Depending on the type of vehicle, the status of the buyer and seller, and the depreciation claimed, the GST rate and valuation may vary. Therefore, it is advisable to consult a tax expert before buying or selling a second-hand car in India, to avoid any tax issues or penalties.
