Under India’s GST framework, the taxation of used vehicle sales varies based on the registration status of the seller and buyer and whether the seller is in the business of resale. Registered sellers in the resale business typically apply GST, using either the Margin Scheme (tax on the profit margin if no Input Tax Credit (ITC) was claimed on purchase) or the Normal Scheme (tax on transaction value if ITC was claimed). A registered dealer can utilise both schemes within the same financial year, depending on the ITC history of each vehicle. GST registration is required for sellers engaged in the resale business if their aggregate turnover, which includes margins from applicable sales and full value from others, crosses the prescribed threshold (₹20 Lakhs or ₹10 Lakhs in special category states). For registered sellers, intra-state sales attract CGST and SGST, while inter-state sales attract IGST. Notably, unregistered sellers selling to registered buyers may be exempt from GST liability under specific notifications. Unregistered buyers generally cannot claim ITC.
A Detailed Note for Registered and Unregistered Sellers & Buyers
1. GST Applicability Matrix
Seller |
Nature of Business |
Buyer |
GST Applicable? |
Valuation (Rule 32(5)) |
ITC Claimed on Vehicle? |
Buyer Eligible for ITC? |
Registered |
In resale of used vehicles |
Registered (In resale) |
Yes (Margin Scheme) |
Margin = Sale Price – Purchase Price or WDV |
No |
No (Under Margin Scheme, ITC not allowed) |
Registered |
In resale of used vehicles |
Registered (In resale) |
Yes (Normal Scheme) |
Transaction Value |
Yes |
Yes (If tax charged separately and all Sec. 16 conds met) |
Registered |
Not in resale of used vehicles |
Registered (In resale) |
Yes (Full Tax) |
Transaction Value |
Yes/No |
Yes (If tax charged separately and all Sec. 16 conds met) |
Unregistered |
In resale of used vehicles |
Registered (In resale) |
No GST (R2C Notified) |
Exempt (Notification No. 10/2017-CTR) |
– |
No |
Registered |
In resale of used vehicles |
Registered (Not in resale) |
Yes (Margin Scheme) |
Margin = Sale Price – Purchase Price or WDV |
No |
No |
Unregistered |
Not in resale of used vehicles |
Registered (In resale) |
No GST (R2C Notified) |
Exempt |
– |
No |
Any Seller |
Any |
Unregistered Buyer |
No ITC |
As per seller status |
– |
No |
Note on Valuation under Margin Scheme:
- Purchase Price: If seller is not claiming depreciation on vehicle.
- Written Down Value (WDV): If seller has claimed depreciation under the Income Tax Act, 1961.
Example:
- Vehicle Purchased: ₹6,00,000
- Depreciation claimed (15%): ₹90,000
- WDV: ₹5,10,000
- Sale Price: ₹6,00,000
- Margin (Taxable Value) = ₹6,00,000 – ₹5,10,000 = ₹90,000
2. GST Registration Requirement for Seller
| Seller Type | Registration Required When |
| Seller (In Business of Resale) | When aggregate turnover exceeds Rs. 20 Lakhs (Rs. 10 Lakhs for special category states) |
| Seller (Not in Business) | Only if making taxable supplies in course/furtherance of business |
Note: Turnover includes margin amount (under margin scheme) and total value under normal scheme.
Example for Turnover Calculation:
- Seller A sells 4 used vehicles:
- 2 under Margin Scheme: Margin ₹1,00,000 + ₹1,50,000 = ₹2,50,000
- 2 under Normal Scheme: Invoice value ₹6,00,000 + ₹8,00,000 = ₹14,00,000
- Aggregate Turnover = ₹2,50,000 + ₹14,00,000 = ₹16,50,000
3. Can Dealer opt for Both Schemes in Same Financial Year?
Yes. A registered dealer can opt to apply Margin Scheme for certain eligible transactions and Normal Transaction Value Method for other transactions in the same financial year, provided he complies with Rule 32(5) of CGST Rules for margin scheme transactions.
- Margin Scheme is applicable only when ITC on the vehicle was not claimed.
- For vehicles where ITC was claimed, normal transaction value method must be used.
This flexibility enables dealers to structure transactions efficiently based on the nature of acquisition and resale.
4. Applicability of IGST vs CGST + SGST on Sale of Used Vehicles
| Seller Type | Buyer Type | Transaction Type | Tax Applicable |
| Registered | Registered/Unregistered | Intra-State | CGST + SGST |
| Registered | Registered/Unregistered | Inter-State | IGST |
| Unregistered | Registered | Intra-State | No Tax (R2C Notified) |
| Unregistered | Registered | Inter-State | No Tax (R2C Notified) |
| Any | Unregistered | Intra/Inter-State | No Tax Applicable |
5. Sample Invoice Format under Margin Scheme
| Field | Details |
| Invoice Number | INV/2025/001 |
| Date | 08-May-2025 |
| Seller Name & GSTIN | ABC Autos, 24XXXXX1234Z5Y |
| Buyer Name & GSTIN | XYZ Motors, 24YYYYY5678X1Z |
| Vehicle Details | Used Car – Maruti Swift, Reg No. GJ01XX1234 |
| Sale Price | ₹5,50,000 |
| Purchase Price/WDV | ₹4,75,000 |
| Margin (Taxable Value) | ₹75,000 |
| Tax Rate | 18% |
| CGST (9%) | ₹6,750 |
| SGST (9%) | ₹6,750 |
| Total Invoice Value | ₹5,63,500 (Includes tax on margin only) |
| Remarks | Tax payable on margin as per Rule 32(5) – No ITC |
6. Legal References
- Rule 32(5), CGST Rules – Margin Scheme for dealers of second-hand goods
- Section 22, CGST Act – Threshold for registration
- Notification No. 10/2017-CTR – RCM exemption for purchase from unregistered person
- Circular No. 231/25/2024-GST – Clarification on demo vehicles and used vehicle valuation
- Section 16, CGST Act – Eligibility for Input Tax Credit
- ICAI GST Handbook, CBIC Notifications & Circulars, ICAI Background Material on GST, and other departmental publications.
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Disclaimer: This flyer is intended solely for educational purposes. While every effort has been made to ensure the accuracy of the content based on the GST Act, applicable Circulars, Notifications, and Rules as on 08/05/2025, this note presents a simplified view for the used vehicle sector. It may not cover all exceptions or nuanced cases. Users are advised to consult their GST Consultant or Chartered Accountant for case-specific guidance.
Acknowledgement: Special thanks to Chartered Accountants, GST Consultants, and authors in the field of Indirect Taxes. Their simplified interpretations and sectoral insights have enabled the preparation of this flyer for awareness purposes.
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Note on Valuation under Margin Scheme:
• Purchase Price: If seller is not claiming depreciation on vehicle.
• Written Down Value (WDV) : If seller has claimed depreciation under the Income Tax Act, 1961.
Example:
• Vehicle Purchased: ₹6,00,000
• Depreciation claimed (15%): ₹90,000
• WDV: ₹5,10,000
• Sale Price: ₹6,00,000
• Margin (Taxable Value) = ₹6,00,000 – ₹5,10,000 = ₹90,000