After the implementation of GST sale of used and old vehicles were taxed at the same rate as applicable on new vehicles which was 28% + Applicable cess which was up to 15%, and due to this effective tax on sale of old vehicles was upto 43%. This higher rate of tax was causing the burden on trade and industry and due to this there was slow down in the used vehicle market.

Big Relief on Sale of Old and Used Vehicles:

Government by issuing the Notification No. 8/2018 Central Tax Rate read with state Tax Notification, reduced the Rate of GST on old and used vehicle as follows:

1. GST-18% on 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.

2. GST-18% on Old and used, diesel driven motor vehicles of engine capacity of 1500 cc or more and of length of 4000 mm

3. GST-18% on Old and used motor vehicles of engine capacity exceeding 1500 cc, popularly known as Sports Utility Vehicles (SUVs) including utility

4. GST-12% on All Old and used Vehicles other than those mentioned from S. No. 1 to No.3

Note: Government also Exempted the Cess applicable on sale of Used vehicle through Notification No. 1/2018 Compensation Cess Rate.

Concessional rates are not available if input tax credit under GST or Cenvat Credit under Cenvat Credit Rules or ITC under State Vat was availed.

If motor vehicles purchased prior to 1-7-2017 and Cenvat credit was not availed, the tax rate is 65% of normal rate. Similarly, if such vehicle was given on financial lease, tax rate will be 65% of normal rate – Notification No. 37/2017-CT (Rate) dated 13-10-2017. & GST Compensation Cess will also be 65% ( Notification No. 7/2017- Compensation Cess (Rate) dated 13-10-2017.)

Valuation of Old or Used car for GST Calculation

Value on which GST at above rates to be calculated shall be Margin of Supply which is to be calculated in the manner as mentioned in Notification which is given below:

1. In Case Depreciation under Income Tax Act Availed: Margin of supply shall be difference between Sale consideration and Written down Value and tax to be calculated on such Margin, and where the margin of such supply is negative, it shall be

As per Income Tax Act , income tax requires computation of depreciation on the asset block , but for the purpose of GST rate is required to be applied for the specific motor vehicle.

In other cases: Margin of Supply shall be difference between sale price and purchase price Tax to be calculated on such Margin, and where the margin of such supply is negative, it shall be ignored. Negative value in valuations, need not be considered as exempt non-GST supply, and therefore, therefore there is no need of reversal of ITC under Rule 42 or Rule 43 of CGST Rules 2017.

Rule 32(5) of CGST Rules 2017 provides special valuation in case of persons dealing in buying and selling of used vehicles. Such dealers can supply the goods as such or after minor processing which does not change the nature of such goods. If no input tax credit has been availed on the purchase of such goods, then GST may be paid only on the differential amount between the selling price and the purchase price.

Sale of used vehicles supplied by GovernmentIn case of used vehicles, supplied by Central Government, State Government, Union territory or a local authority, the registered person receiving the supply is liable to pay tax under reverse charge – Notification No. 4/2017-CT (Rate) dated 28-6-2017 amended w.e.f. 13-10-2017.

In case of sale of used vehicles supplied by Government to unregistered person, respective department of Central Government, State Government, Union territory or a local authority should obtain GST registration and pay GST-para 1 of CBI&C circular No. 76/50/2018-GST dated 31-12-2018.

It is held by AAR Maharashtra in re ( 2018) CMS Info Systems Ltd. GST is payable on supply of old motor vehicles as scrap

(Author can be reached at mr.himanshu@icai.org)

(Republished with Amendments. Amendments been made by CA Anita Bhadra)

Author Bio

Qualification: CA in Practice
Company: D R A & Co.
Location: KANPUR CITY, Uttar Pradesh, IN
Member Since: 01 Feb 2018 | Total Posts: 4

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36 Comments

  1. Balaji Srinivasan says:

    Sir,
    Its a nice article. I have leased a car (less1200 cc and less than 4000mm length) from my company for 2 years starting September 2018. I am planning to buy the same car after the completion of lease which is RV+GST. As in this case I believe that company could have claimed some depreciation value or something related to company tax. He claims the GST of resale to be 28%. Kindly clarify if my GST comes under 12% or 28 % ? Thanks.

  2. Madhan says:

    How much tax % for used bike & Valuation

    Two condition : 1) input tax credit availed during purchase of bike 2) Not input tax credit availed during purchase of bike add asset cost

  3. Ritesh says:

    Sir
    We are purchase car and used for business.
    desal car 1200 cc sheverlt that was purchase dt 08/01/2015. Amounts 650000
    Car company close marketing in India

    And we sold 80000.00 Dec 2019
    While wdv 280000.00 in book

    Please suggest to us
    will we paid gst on sale of car ?
    If yes then
    What was percent to pay ?

  4. vinod parmar says:

    Sir,
    Please note following detail of sold motor cycle please confirm gst liability of the same also note bike in the name of a register pvt.ltd. co.till now.

    Purchase Value – 56300
    Date of Purchase 17/07/13
    Value as per books 9847/-
    Sold at – – — -10500/-
    What is Tax Liability under GST?

  5. Pooja says:

    When I purchased a car, I paid Vat on the same which was not claim in that year. Now I want to sale the car, should i charge the Gst on it ?

  6. veeramani says:

    we are planning to exchange old commercial vehicle and purchase the new commercial vehicle. what is the GST rate of old commercial vehicle.

  7. surya says:

    further pls also advise on what Rate the GST is to be paid. and who can claim the depreciation? when the buyer can claim the depreciation. Because the vehicle is under the loan. till the loan is completed the ownership will be with the finance company. under these circumstance whether my client can claim for the depreciation r not.

  8. surya says:

    My Client is planning to by 2 old trucks for the value of 15 Lacs(9L +6L). one seller is ready to give proper invoice with GST and the second seller is ready to sell for cash without GST Invoice. How these 2 transactions to be accounted in his books, plz advise& help

    1. Satheeshkumar says:

      Registered used commercial vehicle Dealers can buy or sell the vehicles with out GST as individual to individual transaction. can they make the invoice only in the margin , which they getting as revenue amount. more clarity is require

  9. K.Jeyalakshmi says:

    Dear Sir,

    we plan to sale our company car.

    Our company car details as below

    Car maker’s name : Ford India Ltd,

    Maker’s Class :FIGO 1.4 Titanium, CC:1399

    I think length is 3795 mm .Kindly check this car length

    Based on the above details, we will billed 12% GST of difference
    between the selling cost and IT depreciation of car value .

    Kindly check & confirm Is this correct way for GST .

    Kindly forward the invoice format for old car sale.

    Thanks & Regards

    9095743533

  10. Pawan says:

    If sale amount is less than WDV…. i.e. tax liability is zero….

    Please suggest how can i show this transation in GSTR3B and GSTR1

  11. Nikhil Jhanwar says:

    This is very misleading article….Compensation cess has been removed subject to condition that you have not claimed credit on the Vehicle. And margin scheme do not apply to all

  12. ASGEPL says:

    We are winding up our business of Consultancy Services and our annual turnover will not be exceed 15 Lakhs in next 2 years ? We therefore planning to surrender the GST No within this F.Y 2017-18.

    Can we sell the company owned car next year after surrendering GST No.?

  13. Raman says:

    Company used white board Car(Maruthi Estilo below 1200cc)
    year of purchase 2011, selling on 22.3.2017 without margin exchanged for new car with Maruti true value
    @ Rs 1.65Lacs, shall we ignore GST? please clarify.

  14. amar says:

    Dear Sir/Madam
    I have a old bus(Purchase before July 2017) contain more than 13 seater in our company . And our management want to sale it. So please tell me what is HSN code for this and the GST Rate need to levied on the sale invoice.

  15. suresh Jain says:

    our Audi Car(In the name our company) have damaged in total loss in an accident. Insurance company have sold the car @ 700000 to one individual and remaining 1300000 is reimbursed by insurance company. our book value after taking depreciation is 2000000 equal to both. if there is any GST liability on our company

  16. S K Mishra says:

    Whether Notification No. 8/2018 -Central Tax( Rate ) Dated 25-01-2018 superceed Notification No.37/2017 Central Tax (Rate) Dtd.13-10-17, since nothing is mentioned in Notification No. 8/2018 -Central Tax.

    Notification No.37/2017 Central Tax (Rate) Dtd.13-10-17 still holds good inrespect of Vehicle purchased prior to 01-07-2017 & GST is payable @65% of normal rate.

  17. Ashok Kumar Kanunga says:

    Sir,

    Given below the details of sold vehicle, and kindly clarify the GST Liability of the same.

    Model of the Vehicle

    Purchase Value – – – — 56521

    Date of Purchase – – – — 13.04.2013

    VAT% — – — — 14.50%

    Sold at – – — -15000/-

    Bajaj Discount 125CC Self Strart

    What is Tax Liability under GST???

  18. VENKATRAJA BHAT says:

    Slight confusing. As per Notification No.37/2017 Dtd.13-10-17, under Sl. No. 2, HSN Code 87, Motor Vehicles (Used) attracting 65% of applicable tax rate, subject to condition no.2. But as per latest above notification tax rate also reduced and tax only calculated on margin amount instead of whole amount. Second Notification beneficial to tax payer. But what is the need of first notification except Sl. No. 1 (Leasing of Vehicles)?

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