- The Value Added Tax (VAT) for the supply of goods and services was replaced in India by the Goods and Service Tax (GST). The GST is broken down into four separate tax brackets, namely 5%, 12%, 18%, and 28%. The GST rates are applicable to a range of goods and services, including the sale of used cars. utilised automobile sales are subject to a 28% GST that applies to all motor vehicles, whether they are utilised for personal or business purposes. Carriages and accessories for people with special needs are subject to the 5% motor vehicle GST rate, which is the lowest rate available.
- However, when an Individual plans to sell a used car to a dealer, business or another individual, it might make some changes. The GST rate is based on registered and unregistered sellers, which plays an important role when an individual is selling a used car.
In this blog, we will broadly discuss GST rates on second-hand cars and things you should know while selling a used car to a business, a dealer or an individual.
GST on Secondhand cars in India
GST on secondhand cars was introduced in 2017, and the rate of GST for new and used cars was the same. But, to promote the purchase of used cars, the rate of GST for used cars was revised and introduced again. The GST rate of secondhand cars might differ based on the type of car.
Let’s look at the GST distribution table:
| Car category | GST Rate |
| Small/mini cars | 18% |
| Mid-size | 18% |
| Luxury cars | 28% |
GST on Sale of Used Car by Individual
- As an individual, you can sell a used car to a business, a dealer or another individual. However, it is important to know who is going to pay for the GST amount while selling a used car, as it may differ from seller to seller.
- Refer below to know if GST on the sale of used cars by individuals applies to registered and unregistered sellers.
Individual to Individual
No GST fees is applicable to used car sales made by individuals in India. In this case, both buyer and seller is an individual, hence no GST will be appliable. According to the Indian GST law, the sale of a used car is not regarded as a “supply” under GST law.
Individual to Business
This is further divided into these categories:
- a) If both buyer and seller are not registered under GST, then the GST is not applicable on sale.
- b) If the seller is registered and the buyer is not registered under the GST, the GST is applicable on sale.
- c) If the buyer is registered and the seller is not registered, then the GST is applicable.
Individual to Car dealers
If the buyer (car dealer) is registered under GST and the seller is not, then the GST will be applicable on a reverse charge basis.
Conclusion
In conclusion, when an individual is selling a used car, it is crucial to be aware of the goods and services tax. Individuals have options available to whom they can sell their car. It is important to know the GST rates which will be applicable to the seller. It is, therefore, best to be familiar with every aspect of GST on an individual’s sale of second-hand cars. With this blog, you will know about GST on selling old cars. Moreover, if you are planning to buy a secondhand car, you can opt for Credit Success used car loan.
