GST on the sale of used cars

GST on The Sale of Used Cars by Individual

September 15, 2023 • 2435 views

In India, Goods and Service Tax (GST) was introduced as a successor of Value added tax (VAT) for the supply of goods and services. GST is divided into four different tax slabs, i.e., 5%, 12%, 18%, and 28%. The GST rates apply to various goods and services, such as selling used cars. The GST on the sale of used cars is 28%, which applies to motor vehicles, including personal or commercial vehicles. The lowest GST rate on motor vehicles is 5% and is applied to carriages and accessories for specially -abled people.  
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 Poonawalla Fincorp's used car loan.

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

We are a team of expert writers and editors passionate about providing our readers with 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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