GST for Car Dealers

GST for Secondhand Car Dealers

September 07, 2023 • 1405 views

Within the ever-evolving realm of the automotive sector, secondhand car dealers play a vital role. They not only offer cost-effective choices to consumers but actively contribute to the Indian economy's growth as well.
When we talk about the significant changes in the Indian economy over the past years, the Goods and Services Tax (GST) often comes to mind. Its implementation has brought about significant changes in how businesses like secondhand car dealers operate. 
To know more about it, let’s delve into the realm of GST for secondhand car dealers. 

GST for Secondhand Car Dealers and Its Applicability

GST is applied to the trade of pre-owned cars, similar to new cars. The rate of GST on the sale of used cars depends on the categorization of the car. The GST rates on second-hand cars stood as follows:

Pre-Owned Car Types

Engine Capacity

GST Rate

Petrol Car

Up to 1200 CC

12%

Petrol Car

Over 1200 CC

18%

Diesel Car

Up to 1500 CC

12%

Diesel Car

Over 1500 CC

18%

Note: The above-mentioned rates are indicative and can change.

Factors About Aspects of GST for secondhand car dealers

  • Input Tax Credit

If you are a registered second-hand car dealer, you can receive a benefit in the form of an Input Tax Credit. This means the GST you pay when you buy cars or for business expenses can be reduced from the GST you need to pay when you sell cars. However, note that you cannot avail yourself of this benefit on personal expenses.

  • Marginal Tax Scheme:

Secondhand car dealers can choose a ‘Marginal Tax Scheme,’ through which they only pay GST on the difference between the selling and buying price. This means they are taxed only on the profit they make, not the total selling price. It is helpful for dealers who make lots of sales with small profits.

  • Reverse Charge Mechanism:

For secondhand car dealers, the reverse charge mechanism is applicable under specific circumstances. This mechanism requires the buyer of goods or services to pay the GST directly to the government instead of the supplier collecting it. A reverse charge is commonly applicable when a registered dealer buys from a seller who is not registered for taxes.

  • Documentation and Record Keeping:

Keeping and maintaining good records is important when following the GST rules. As a secondhand car dealer, you should save documents related to used car sales, your spending details, and other financial details. These papers are useful for sending in your GST forms and can also be used if an official needs to check your business details later.

Conclusion

To sum up, GST has made major changes to how taxes work for secondhand car dealers. Dealers need to know about how taxes are calculated, how they can get credit for taxes they have paid, and the different rules for different car types. They should also understand different tax structures and guidelines. Since tax rules can change, dealers should learn about the latest updates in the taxation system and get help from experts when required.

 

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Pre-Owned Car Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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