GST on selling old cars: Recently, the GST Council has decided to increase the rate of Goods and Services Tax (GST) applicable on the sale of old cars from 12% to 18%. Earlier, it was levied at different rates depending on the type of vehicle.
The GST Council has decided to increase the rate of Goods and Services Tax (GST) applicable on the sale of old cars from 12% to 18%. Earlier, it was levied at different rates according to the type of vehicle. People have many questions in their minds about the new GST rules (Used Car GST Rates) imposed on old or second-hand cars. Like, how much GST has been imposed on it? Will GST have to be paid on selling the car? If the car is sold at a loss, will tax still have to be paid? And to whom will these rules apply? Let us tell you the answers to all these questions one by one.
To whom will the new GST rules apply?
This new GST rule will apply to those who are GST registered and deal in old cars. The government has clarified that this rule will apply only to those who do business of buying and selling old or used cars, such as companies like Spinny, Car Dekho, Cars24. GST registration is mandatory for these businessmen, and they will have to pay 18% GST.
According to the new rules, a registered dealer will have to pay GST on the sale of an old or used car only if he earns a margin on selling the vehicle. This means that when the selling price is more than the depreciation adjusted cost of the vehicle, only then will he have to pay GST as per the new rules.
What impact will it have on the common man?
If you are a common citizen and want to sell your old car, then there is relief for you. This new GST rule will not have any effect on the common man. If you sell your old car, then you will not have to pay GST. This rule applies only to those who buy and sell old cars for business.
Will GST have to be paid even if the sale is sold at a loss?
If a GST registered businessman sells an old car and incurs a loss, he will not have to pay GST. GST will be applicable only in the case when the businessman makes a profit on the sale of the car, that is, GST will have to be paid on the profit, but in case of loss, no tax will be levied.
Tax on used car sales
Currently, all old and used automobiles including EVs are eligible for 12% GST. Old and used petrol cars with engine capacity of 1200 cc or more and length of 4000 mm or more, diesel vehicles and SUVs with engine capacity of 1500 cc or more and length of 4000 mm are eligible for 18%. Now the GST Council has imposed 18% GST on all cars including EVs.
According to the Finance Minister, the Council has decided to increase the tax rate on the sale of all used EVs from 12% to 18%, just like non-electric vehicles. And this will apply only on the margin value.
The new GST rule has no significant impact on the common man
The increase in GST will have the biggest impact on those businesses that claim input tax credit (ITC) on the purchase of vehicles. For consumers, this rule will depend on whether they bought the vehicle from a registered seller or an unregistered seller. The new GST rules are applicable only to GST registered businessmen and it will not have any significant impact on the common man. Apart from this, businessmen will not have to pay GST on sales at a loss. This rule has been brought with the aim of ensuring transparency and tax collection in the business of buying and selling old cars.
