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GST on sale of old and used vehicles reduced

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.
CA Himanshu Singh

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 vehicles.

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

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

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 ignored.

2. 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;

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

View Comments (23)

  • 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

    • 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

  • 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.

  • If company sales a used motor vehicle then under which head it will come either it will come under Exempt Rate or Nil Rate ?

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