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GST on sale of old car

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Meaning of second-hand goods under GST

The GST law does not define second-hand goods. Also, none of the other laws including Excise, State VAT Laws have defined second hand goods.

Looking at the definition of Goods, Section 2(52) of the Central Goods and Services Tax Act states that

"goods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply".

Hence second hand goods, since not specifically excluded in the definition, are included in the definition of goods and the GST law shall apply to old goods in the same manner as it applies to new goods.

GST applicability on sale of old car

As per Section 7(1) of the CGST Act, the expression supply includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.

Therefore, supply of old car made for a consideration in the course or furtherance of business shall be taxable under GST law and all the provisions of GST law shall be applied to such supply.

GST rate applicable on sale of used cars

The Government had reduced the GST rate on used cars in cases where the input tax credit has not been availed in respect of the cars. The rate of GST applicable in such cases are as follows:

GST @18%

  • Petrol Liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven cars of engine capacity of 1200 cc or more and of length of 4000 mm or more.
  • Diesel driven cars of engine capacity of 1500 cc or more and of length of 4000 mm.
  • Cars of engine capacity exceeding 1500 cc, popularly known as Sports Utility Vehicles (SUVs) including utility vehicles. Note: SUV includes a motor vehicle of length exceeding 4000 mm and having ground clearance of 170 mm. and above.

GST @12%

  • All Old and used Vehicles other than those mentioned above

Note: Government also exempted the Cess applicable on sale of Used car where ITC has not been availed.

As in majority of cases ITC is blocked for motor vehicles and thus no question of it being availed. Thus the above reduced GST rates and NIL cess rate would be applicable on sale of old vehicles.

However if the person is eligible to avail and has in fact availed input tax credit on car which he is now selling, normal GST rate of 28% plus 17% / 20% / 22% towards Compensation Cess, as applicable, need to be charged and paid on sale of such car.


Applicability of Reverse charge (RCM) on purchase of used car from Government

1. In case of used cars supplied by Central Government, State Government, Union territory or a local authority, the registered person receiving the supply is liable to pay tax under reverse charge.

Reverse charge means the recipient of goods or services is liable to pay tax on supply instead of the supplier of such goods or services. Under RCM, all provisions of GST law shall apply to the recipient as he is a person who liable to pay tax.

2. In case of used cars supplied by the Government to an unregistered person, the respective department of Central Government, State Government, Union territory or a local authority should obtain GST registration and pay GST.


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TaxGyata Team

TaxGyata Team