As of December 21st, the GST Council has clarified that all used cars, including EVs, will be subject to an 18% GST rate.
18% GST was already in effect for the sale of:
- Used petrol vehicles with an engine capacity exceeding 1200 cc and a length greater than 4000 mm.
- Used diesel vehicles with an engine capacity exceeding 1500 cc and a length greater than 4000 mm.
- Used SUVs (Sport Utility Vehicles).
The revised GST rates will be applicable only in business-to-business transactions. Specifically, the 18% GST will be levied on the supplier’s margin, which is calculated as the difference between the purchase price and the selling price of the used car, taking into account any depreciation claimed. This clarification excludes instances where used cars are exchanged between individuals.
The current 12% GST rate will continue to apply to transactions involving the sale and purchase of used vehicles by individuals.
GST on Used Car Sales:
- GST is payable on the supplier’s margin, which is the difference between the selling price and the purchase price of the used car.
- If a supplier has claimed depreciation on the used car under the Income Tax Act, GST is payable on the margin calculated between the selling price and the depreciated value of the car.
- If the calculated margin (based on either purchase price or depreciated value) is negative, no GST is payable.
