By Admin The Goods and Services Tax (GST) has brought significant changes to the automobile sector in India, including the buying and selling of used cars. Understanding the GST rate applicable to used cars is crucial for both buyers and sellers to ensure compliance and make informed financial decisions.
What is the GST Rate on Used Cars?
As of 2025, the GST rates on used cars in India are as follows:
- 12% GST: Applicable to used cars (petrol/diesel) with engine capacity below 1200cc (petrol) or below 1500cc (diesel).
- 18% GST: Applicable to used cars with engine capacity above 1200cc (petrol) or above 1500cc (diesel) and SUVs.
Note: These rates are applicable when the sale is made by a registered dealer. If an individual sells a used car to another individual (not a business transaction), GST is not applicable.
Key Points to Remember
No Cess on Used Cars: The GST Compensation Cess, which applies to new luxury and SUV cars, is not applicable to used cars.
- Margin Scheme: Dealers pay GST only on the margin (difference between the selling price and the purchase price), not the entire transaction value. This prevents double taxation.
- Unregistered Dealers: If the seller is not registered under GST (e.g., a private individual), GST does not apply.
- Electric Used Cars: Used electric vehicles attract a lower GST rate of 5%.
Example Calculation
Suppose a registered dealer buys a used petrol car (engine 1000cc) for ₹3,00,000 and sells it for ₹3,50,000.
- Margin = ₹3,50,000 – ₹3,00,000 = ₹50,000
- GST @ 12% on ₹50,000 = ₹6,000
Why the GST Rate Matters
- For Buyers: Knowing the GST rate helps you understand the final on-road price.
- For Dealers: It impacts your pricing strategy and tax compliance.
- For the Market: Lower GST rates on used cars have boosted the pre-owned car market, making cars more affordable and encouraging formal transactions through registered dealers.
Recent Updates
The GST Council, in its 25th meeting (January 2018), reduced the rates on used cars to the current levels to promote the organized pre-owned car sector. These rates remain unchanged as of May 2025.
Conclusion
The GST rate on used cars in India is 12% or 18%, depending on engine size, with a special 5% rate for electric vehicles. The margin scheme ensures tax is only paid on the dealer’s profit, making the used car market more transparent and affordable. Always check the latest notifications or consult a tax professional for the most up-to-date information.
References:
- GST Council Notifications
- Central Board of Indirect Taxes and Customs (CBIC)
- Industry news and updates (2025)
If you have a specific case or need a calculation, feel free to ask!
