Sale of a Used Vehicle & GST Applicability
GST Applicability on Sale of a Used Vehicle is always a matter of interesting discussion amongst the taxpayers and tax professionals.
Here is a short summary of the provision.
1. For Individuals Selling Used Cars: NO GST!
If you sell your second-hand car privately, GST is NOT applicable!
Let us have a know about it:
As per Section 7(1) of CGST Act, 2017, GST applies only when a sale is in the course or furtherance of business.
An individual sells their second-hand car as a private sale, it is not “in the course or furtherance of business.” Hence, it does not qualify as a taxable supply under GST.
II. For Businesses Selling Used Vehicles: GST Applies
As per Notification No. 8/2018-Central Tax (Rate) as amended by Notification No. 4/2025-Central Tax (Rate) a unified rate of 18% GST charged on all categories used vehicles sales.
How to calculate GST:
Rule 32(5) of CGST Rules, 2017 provides for Margin scheme for person dealing in buying and selling of second hand used vehicles. It applies when a registered person purchases from:
An unregistered person, OR
A seller who did NOT claim ITC on the vehicle
GST is payable on Taxable Value = Selling Price – Purchase Price
if this margin is negative, then GST is not applicable!
If depreciation is claimed under Section 32 of the Income Tax Act, GST is levied on:
Sale Price – Depreciated Book Value (not purchase price).
III. Reverse Charge Mechanism (RCM)
If a registered used car dealer pays GST under Rule 32(5), they are EXEMPT from RCM on purchases from unregistered sellers. (Notification No. 10/2017-Central Tax (Rate) – 28th June 2017)
However, if a used vehicle is sold by the Central/State Government, Union Territory, or Local Authority to a registered person, RCM applies! (Notification No. 36/2017-Central Tax (Rate)
The copy of the Notification is as under:
