The Goods and Services Tax, or GST, is a sort of value-added tax that acts as a comprehensive indirect tax and seeks to replace several other taxes in many nations. GST is normally calculated based on the profit or margin obtained from the sale of the car when it comes to the purchasing and selling of used cars. It typically accounts for 18% of the cost of the car and is made up of 9% CGST and 9% SGST. However, it might change depending on how powerful the automobiles’ engines are.
Let’s understand it better with the help of the table given below:
| Type | Engine Capacity | GST (%) |
| Petrol Car | Up to 1200CC | 12% |
| Petro Car | Over 1200CC | 18% |
| Diesel Car | Up to 1500CC | 12% |
| Diesel Car | Over 1500CC | 18% |
Tax Implications of GST on the Sale of Pre-Owned Cars
As outlined in the GST Act, the application of GST extends to the provision of goods and services within India. When considering second-hand automobiles, GST’s influence varies across two distinct scenarios.
Selling used cars by unlicensed vendors: If an unregistered dealer vends a used car to either a registered dealer or a final consumer, GST does not apply. Nevertheless, the purchaser must verify that the seller has settled all pertinent dues like road tax, insurance, and miscellaneous fees. If the seller has any unpaid liabilities, the responsibility falls upon the buyer for settlement.
Selling used cars by licensed vendors: When a registered dealer sells a pre-owned car, GST is applied at a rate of 18%. Whether the buyer is a registered dealer or a final consumer, this rate remains constant. However, the GST computation is based on the dealer’s margin, which is the variance between the selling and purchasing prices.
Also Read :- GST Calculation for Secondhand Car Dealers
Influence of GST on the Pre-Owned Car Market
The impact of GST on the resale of used cars has brought mixed impacts within the secondhand car market. At the same time, it has certainly enhanced the transparency of transactions and streamlined the taxation process associated with buying and selling used cars. It has also led to a rise in the purchasing expenses. This is due to the GST being computed based on the dealer’s profit margin.
Tax Implications of GST on the Purchase of Pre-Owned Cars
When purchasing a used car, the percentage of Goods and Services Tax is similar to the sale of the same. It varies according to the engine capacity here as well. This adds to the cost of used cars, making it difficult for individuals to afford them by paying lump sums. With Credit Success Used Car Loan, you can buy your desired car without stressing your finances. Alongside, you get high loan amounts up to 100% of the car’s value with flexible repayment tenure.
Conclusion
Now we know how the percentage of GST to be applied changes according to factors like the type and engine capacity of the cars. Let’s not forget that GST on secondhand cars is usually lower than new cars. Therefore, it is preferred by most individuals to go for pre-owned cars and to make it even more affordable, Credit Success offers Pre-Owned Car Loans at competitive interest rates, with easy and hassle-free loan application process, quick approvals, and flexible repayment tenure. So, apply now and let us be your enabler in getting you your dream car.
