“Unravel the complexities of GST implications on the sale of old/used vehicles. Delve into the valuation rules under CGST Rules, 2017, governing transactions involving second-hand goods. Explore key points, including the applicability of the rule, conditions for valuation, and the impact of claimed depreciation. Understand the GST rates on used vehicles, categorized by engine capacity and type.”
Now a days, we can see multiple startups and dealers engaged in sale and purchase of used vehicles, GST laws has some peculiar provisions when it comes to taxation of used vehicle.
The valuation of such transactions is governed by the GST valuation rule of which relevant extract has been reproduced below:
CGST Rules , 2017
Chapter IV – Determination of value of supply
Rule 32. Determination of value in respect of certain supplies.-
“(1) Notwithstanding anything contained in the provisions of this Chapter, the value in respect of supplies specified below shall, at the option of the supplier, be determined in the manner provided hereinafter.
(5) Where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored:”
Important points:-
1. This rule is applicable only in those cases where used goods are sold as such or after minor processing which does not change the nature of goods.
2. No Input tax credit has been availed on purchase of such goods.
3. Value of supply shall be excess of selling prices over purchase price, if it comes to a negative value then it shall be ignored.
Explanation to notification 8/2018 central tax (rate) says that for the purposes of this notification, in case of a registered person who has claimed depreciation under section 32 of the Income-Tax Act,1961(43 of 1961) on the said goods, the taxable value shall be the difference between sale value of such used vehicle and the depreciated value of used vehicle on the date of sale, if it is negative, it shall be ignored. Hence no GST to be paid if the net value is negative.
Rate of Tax under GST on Used Vehicles
The rate of tax to be charged in GST while selling used vehicles is given in notification no. 8/2018 central tax (rate) dated 25-01-2018. The notification has mentioned below table for specifying the rate of tax:
| S. No. | Chapter, Heading, Subheading or Tariff item |
Description of Goods | Rate |
| (1) | (2) | (3) | (4) |
| 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 Explanation. – For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under. |
18% |
| 2 | 8703 |
Old and used, diesel driven motor vehicles of engine capacity of 1500 cc or more and of length of 4000 mm Explanation. – For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under. |
18% |
| 3 | 8703 |
Old and used motor vehicles of engine capacity exceeding 1500 cc, popularly known as Sports Utility Vehicles (SUVs) including utility vehicles. Explanation. – For the purposes of this entry, SUV includes a motor vehicle of length exceeding 4000 mm and having ground clearance of 170 mm. and above. |
18% |
| 4 | 87 | All Old and used Vehicles other than those mentioned from S. No. 1 to S.No.3 | 12% |
Nothing is mentioned about GST rates on second-hand goods other than vehicles in notification No. 08/2018 – central tax rate or any other notification, hence all other transactions of sale of used goods shall be taxable at the same rate as the new goods of similar category are charged.
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Author Bio
Who is responsible for the payment of GST when a company claims depreciation and sells an asset for X amount? Should I compute this amount at 118%, which includes GST, or should I consider the gross value, on that GST borne by the company? because the notification states that GST will be charged on the margin. i.e dif b/w Paid and Dep value.
Nice, Thank you