GST Rate on old Vehicle (Second hand Goods)

Before the introduction of GST, higher tax rates were charged on sale of second hand vehicles. The old vehicles were taxed with same rate were applicable on new vehicles and due to this effective rate of tax on old vehicles goes upto 43%, which was very costly affair on the purchase of old vehicles.Big Relief provided on Sale of Old and Used Vehicles through Notification No. 8/2018 Central Tax (Rate) dated 25th January, 2018

According to this notification GST Rate on Old & used Vehicles :

Below rates are only applicable when ITC is not availed while purchasing vehicles :-

S.No.	Chapter, Heading, Sub- heading or Tariff item	Description of Goods	Rate
1.	8703	LPG or CNG, engine capacity of 1200 cc or more and of length of 4000 mm or more.	18%
2.	8703	Diesel driven motor vehicles of engine capacity of 1500 cc or more and of length of 4000 mm	18%
3	8703	Engine capacity exceeding 1500 cc, popularly known as Sports Utility Vehicles (SUVs) including utility vehicles.	18%
4.	87	All Old and used Vehicles other than those mentioned from S. No. 1 to S.No.3	12%

Cess: Cess is not levied on the sale of old vehicle, it has been declared Nil rate by “notification 01/2018-Compensation (Rate) dated 25th January 2018”.

Important Note: If ITC has been availed then you will not get the benefit of the concessional rate mentioned in the above notifications and GST will also be charged on the sales amount. Moreover, the GST rate mentioned above will be charged on the margin amount (Sales value-purchase value) and not on the sale value.

According to Margin scheme {Rule 32(5)}, taxable value of second hand goods is calculated, the person who deals in second hand goods has to pay GST only on the margin amount (sale amount less purchase amount) and If the sale amount is less than the purchase amount then in this case the margin amount will be Nil and no GST amount will be charged.

Example: 1
Suppose, you buy an old SUV car above 1500 CC for Rs. It was purchased for Rs.8,00,000 and on which no ITC has been availed and you sold that car for Rs.8,50,000/-.
So in this case your value of supply on which GST will be charged will be Rs.50,000/- (8,50,000-8,00,000).
GST =50,000* 18% = Rs. 9000/-

Example: 2
Suppose you buy an SUV car above 1500 CC for Rs. 8,00,000, on which no ITC has been availed and an expense of Rs.10,000/- has been incurred on its repair and maintenance. Then you sold that car for Rs.8,50,000/-.
According to CGST Rules, only the purchase price is reduced from the sale price to calculate the value of supply. So in such a case, the expense of repair & maintenance has to be ignored. But ITC of the GST charged on expenses will be available. For example, if out of expenses of Rs.10,000/-, expenses of Rs.7000/- are done through a registered person, then Rs. ITC of that amount will be available on GST charged on Rs. 7000/-.
So in this case your value of supply on which GST will be charged will be Rs.50,000/- (8,50,000-8,00,000).
GST=50,000*18%=Rs.9000/-

Reference:
Notification No. 8/2018 -Central Tax (Rate) dated 25th January, 2018
In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest to do, on the recommendations of the Council, hereby exempts the central tax on intra-state supplies of goods, the description of which is specified in column (3) of the Table below, falling under the tariff item, sub-heading, heading or Chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), as are given in corresponding entry in column (2), from so much tax as specified in Schedule IV of Notification No. 1/2017 -Central Tax (Rate), as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4), of the said Table, on the value that represent margin of the supplier, on supply of such goods.

S. No.	Chapter, Heading, Sub- heading 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 4000 mm or more. 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.	9%
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.	9%
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.	9%
4.	87	All Old and used Vehicles other than those mentioned from S. No. 1 to S.No.3	6%

Explanation –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 value that represents the margin of the supplier shall be the difference between the consideration received for supply of such goods and the depreciated value of such goods on the date of supply, and where the margin of such supply is negative, it shall be ignored; and
• In any other case, the value that represents the margin of supplier shall be, the difference between the selling price and the purchase price and where such margin is negative, it shall be

2.This notification shall not apply, if the supplier of such goods has availed input tax credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act, 2017, CENVAT as defined in CENVAT Credit Rules, 2004 or the input tax credit of Value Added Tax or any other taxes paid, on such goods.

Notification 01/2018-Compensession (Rate) dated 25th January 2018
In exercise of the powers conferred by sub-section (2) of section 8 of the Goods and Services Tax (Compensation to States) Act, 2017 (15 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 1/2017-Compensation Cess (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 720 (E), dated the 28th June, 2017, namely,-

In the said notification, in the Schedule, -

• After No. 42 and the entries relating thereto, the following serial numbers and the entries shall be inserted
  

  (1)	(2)	(3)	(4)
  42A.	87	All old and used motor vehicles   Explanation: Nothing contained in this entry shall apply if the supplier of such goods has availed input tax credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act, 2017, CENVAT credit as defined in CENVAT Credit Rules, 2004, or the input tax credit of Value Added Tax or any other taxes paid on such vehicles.	NIL

• in No. 43, for the entry in column (2), the entry “8702 or 8703”, shall be substituted;
  Note: The principal notification No.1/2017-Compensation Cess (Rate) dated the 28th June, 2017 was published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (i), vide number G.S.R. 720(E), dated the 28th June, 2017 and last amended vide notification No. 6/2017-, Compensation Cess (Rate) dated the 13^th October, 2017, published vide number G.S.R.1282(E), dated the 13th October, 2017.

FAQs (Frequently Asked Questions) :-

Q : What is the GST rate applicable to old vehicles/used vehicles under the Margin Scheme? Any notifications issued by the department for the same?
A : GST Rate is old vehicles/ used vehicles is defined through Notification No. 8/2018 -Central Tax (Rate) dated 25th January, 2018

Q : How to calculate the GST on sale of second hand car?
A : GST on second hand car is calculated according to Margin scheme {Rule 32(5)}. According to this rule, the person who deals in second hand car has to pay GST only on the margin amount (sale amount less purchase amount) and if the sale amount is less than the purchase amount then, in this case, the margin amount will be nil and no GST amount will be charged.

Q : Is there a specific GST rate for the sale of old commercial vehicles ?
A : GST Rate on commercial vehicles will be the same as explained above (Notification No. 8/2018 -Central Tax (Rate) dated 25th January, 2018).

Q : Is cess applicable on the sale of old vehicles, is there any notification?
A : Cess is not levied on the sale of the old vehicle, it has been declared Nil rate by “notification 01/2018-Compensation (Rate) dated 25th January 2018.

Q : Is there any specific conditions for using the Margin Scheme on sale of old vehicles?
A : Yes, the Margin scheme will not apply in the case of ITC (input tax credit availed).

Disclaimer:-The information available on this website/ App is solely for informational purposes. We make no representation or warranties of any kind, express or implied about the accuracy, reliability, with respect to information and material or video available on website/APP, any reliance you place on such information is therefore strictly at your own risk. We are not liable for any consequence of any action taken by you relying on the material/information provided on this website/APP.