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Higher GST of 18% will impact individuals and businesses
GST on used car sale: Consumers buying a used car now need to pay more GST. Moreover, if a business is claiming input tax credit, then GST needs to be paid on the sale value and not margin. However smaller cars like Renault Kwid may benefit from lower GST of 12% if buying used.
The GST council has recommended an increased 18% GST rate on the margin value of used car sales for specified petrol vehicles with 1200 cc or more, diesel vehicles with 1500 cc or more, and all EVs. The GST council also did not specify any new reverse charge liability or liability to tax on vehicles sold by unregistered sellers to registered or unregistered persons. If the seller is non-GST registered then this above ruling does not apply.
However, this is not a new GST rule as 12% GST used to be charged earlier on such transactions. In any case most businesses cannot claim input tax credit on purchase of a car even if it's bought in the name of the GST registered business. The only exception to this claim of input tax credit (ITC) rule is car showroom dealers and other specified persons like transporters, etc who can claim ITC on car purchases.
Read below to find out who exactly will get impacted due to this recommendation of increased GST amount on sale of used cars.
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