GST Reformation on Second-Hand Vehicle Sales: Impact and Insights

The recent changes in GST regulations state that a registered person selling old or used vehicles must pay GST only on the margin, not the entire sale price. The GST Council decreed a uniform 18% tax rate on such sales, influencing costs of second-hand electric and fossil fuel vehicles.

The Goods and Services Tax (GST) Council has revamped taxation rules concerning old and used vehicles, mandating a single tax rate of 18% on the margin earned during the sale. Previously, various rates applied depending on the vehicle type. This proactive measure primarily affects registered sellers.

Notably, when a registered individual sells an old vehicle at a margin—that is, when the vehicle's sale price exceeds the depreciated purchase price—a GST of 18% is applicable. However, if the margin is negative, no GST payment is due. This aims to equalize the tax landscape for both electric and fossil fuel vehicles.

While the regulation demands strict transaction documentation, it aligns with government's pollution control goals and shifts economic dynamics within the second-hand car marketplace. Industry experts foresee minimal price hikes for second-hand small cars and potential deterrence for buyers in the EV sector.

(With inputs from agencies.)