GST On Old and Used Vehicles: The government is being criticized on social media for imposing GST on the sale of old and used vehicles. On December 21, 2024, a decision was taken in the GST Council to impose GST on the sale of old and used vehicles, which also includes electric vehicles. But despite heavy criticism, it took three days for the government to issue a clarification. Now the government has said that it has issued a clarification to clear the confusion regarding imposition of GST on sale of old vehicles. The government has made it clear that if the margin on sale of old vehicles is negative and no profit is being made, then GST will not have to be paid on it.
The government has issued FAQ (Frequently Asked Questions) regarding GST on sale of old and used vehicles including EVs, in which an attempt has been made to answer all the questions arising in the minds of common people with examples so that it can be The confusion spreading regarding the issue can be removed.
Question No. 1 – What suggestion has been given in the 55th meeting of the GST Council regarding the sale of old and used vehicles other than EVs?
Answer: To simplify the matter, the GST Council has decided to impose 18 percent GST on all old and used vehicles including EVs. Earlier different rates were charged. The GST Council has not recommended imposing any new tax.
Question No. 2 – Who has to pay GST on sale of old and used vehicles?
Answer – Only registered persons who do business related to sale of old and used vehicles have to pay GST.
3. If a person sells an old and used car to another person, will he have to pay GST on it?
Answer – No. GST will not be applicable in such case.
4. Will GST have to be paid on the sale value of old and used vehicles?
Answer – If a GST registered person has claimed depreciation under Section 32 of the Income Tax Act 1961, GST will have to be paid only on the supplier’s margin value. That means GST will have to be paid on the difference between the sale value and depreciated value of passenger vehicles. But in such cases when the margin is in negative then no GST will be levied.
The government has also given examples to issue clarification in this entire matter.
example number 1 – Suppose a registered person sells an old and used car to another person for Rs 10 lakh, the purchase value of which was Rs 20 lakh and depreciation of Rs 8 lakh has been claimed under the Income Tax Act, then he has to pay the penalty to the supplier. No GST will have to be paid on margin. That means the differential value of the selling price is Rs 10 lakh and the depreciated value (Rs 12 lakh i.e. Rs 20 lakh – Rs 8 lakh) is negative.
If the depreciated value is Rs 12 lakh and the selling price of the car is Rs 15 lakh, then in such a case the supplier will have to pay GST at the rate of 18 percent on the margin of Rs 3 lakh.
Example number 2 – Suppose if a registered person sells an old and used vehicle to another person for Rs 10 lakh, in which the purchase price of the registered person was Rs 12 lakh. So in such a case the supplier is not required to pay any GST because the supplier’s margin is in negative.
But if the purchase price is Rs 20 lakh and the selling price is Rs 22 lakh, then GST will have to be paid on the supplier’s margin of Rs 2 lakh.
