Are you wondering how GST applies to old and used cars? Questions like “What is the GST rate?”, “Who is impacted?”, “Do you need to pay GST when selling your car?”, or “What if you sell at a loss?” might be on your mind. Here’s a simplified explanation of GST on used cars to clear the confusion.
GST Rate on Used Cars
The GST Council had increased GST on used cars from 12% to 18%, sparking widespread discussion. However, this rate is applicable only to GST-registered businesses dealing in used cars, such as companies like Spinny, Cars24, and OLX. If an individual sells a used car, no GST applies.
Key Details:
1. What was announced?
– GST at 18% applies to petrol and diesel vehicles meeting these criteria:
– Engine capacity of 1200cc or more.
– Length of 4000mm or more.
– For diesel vehicles, engine capacity of 1500cc or more.
– Electric vehicles (EVs) and other vehicle categories are also included.
Gold Rate
Tuesday 28 Jan. 2025
2. Does GST apply to individuals selling their cars?
– No. If a common person sells a used car, GST rules do not apply. The rules apply only to businesses registered under GST.
3. What about losses?
– GST is levied only on the profit margin for GST-registered businesses.
– Example: If a car is purchased for ₹5 lakh and sold for ₹6 lakh, GST at 18% applies only on the ₹1 lakh profit (₹18,000 GST).
– If the car is sold at a loss (e.g., bought for ₹5 lakh and sold for ₹4.5 lakh), no GST is applicable.
Impact on Common People
For individuals, these GST rules on used cars have no direct impact. The 18% GST rate applies only to businesses in the used car trade.
