E-way Bill Registration, GST on used CarsA 2016 study by Quartz Media states that the Indian middle class population doubled in size to 600 million people in 8 years. The booming population obviously needs its chariots. And since not everyone can afford to buy BMWs, the used car segment of the Indian automobile industry is on the rise. So, today we will be inspecting the GST rates for used cars and its impact.

Until a decade ago, more than 60% of the used car transactions were C2C in nature. There was an absence of organized players and so people preferred purchasing cars for local dealers, mechanics or friends and relatives. Now, like most other things, you can buy and sell used cars online. This is giving a boost to the used cars section.

GST Rates for Used Cars

Under GST, tax and cess on new and old vehicles were the same. There was 28% GST plus 1-3% cess on small or compact cars, and 28% GST and 15% cess on medium and bigger cars or sports utility vehicles (SUVs). This GST was chargeable on the profit margin of the used car dealers. The effective GST rate was in the range of 29% to 53%. This led to an increase in pressure on sales volume.

The used cars segment was already under pressure. Realizing this, the GST Council reduced the GST rates on used cars. The 25th Council meeting was held on 18th January 2018 and the rates came into effect from 25th January 2018.

As per the notification these are the new GST rates for sale of used cars:

 

Used cars, GST on used cars

Note: Government also exempted the cess applicable on sale of used vehicles

Notification No. 1/2018 Compensation Cess Rate.

 

The removal of cess and reduction in GST rates will prove to be beneficial to the Indian automobile industry.

GST Return Filing Solution, Used Cars, GST on Used Cars

Valuation of Old or Used cars for calculating GST

Traders will charge GST on the margin of supply. Calculate the margin of supply in the following manner:

  1. Depreciation availed under Income Tax Act:
  • Margin of supply = Difference between Sale consideration and Written down Value.
  • The value of supply will be ignored where the margin of such supply is negative.
  1. In other cases:
    • Margin of Supply = Difference between sale price and purchase price.
    • The value of supply will be ignored where the margin of such supply is negative.

We hope this clarifies all the doubts regarding GST rates applicable on sale of used cars.