The FAQs outline who is liable to pay GST, the conditions under which GST is applicable, and how it is calculated based on the margin between the purchase price and the sale price, including scenarios involving depreciation claims.
These clarifications are crucial for businesses and individuals involved in the sale of used vehicles.
1. What are the recommendations of the 55th GST Council meeting on the sale of old and used vehicles other than EVs?
As a measure of simplification, the Council recommended to unify and prescribe a single rate of GST on the sale of all old and used vehicles, including EVs at 18%, which was leviable at different rates earlier. The GST Council has NOT recommended any imposition of a new tax on the same.
2. Who are liable to pay GST on the sale of old and used vehicles?
Only registered persons such as businesses involved in the purchase and selling of old and used vehicles etc are liable to pay GST.
3. Is GST applicable if an individual sells an old and used car to another individual?
No. GST is not applicable in this case.
4. Is the GST payable on the sale value of the old and used vehicle?
Where the registered person has claimed depreciation under Section 32 of the Income Tax Act 1961, GST is payable only on the value representing the margin of the supplier i.e., the difference between consideration received for the supply of such goods and the depreciated value of such goods on the date of supply. Where such margin is negative, no GST is payable.
In any other cases, GST is payable only on the value that represents the margin of the supplier i.e., the difference between the selling price and the purchase price. Where such margin is negative, no GST is payable.
Illustration 1:
Suppose a registered person is selling an old and used vehicle to any person at ₹10 lakh, where the purchase price of the vehicle was ₹20 lakh and has claimed depreciation of ₹8 lakh on the same under the Income Tax Act, then he is not required to pay any GST as the margin of the supplier i.e., the differential value of the selling price (₹10 lakh) and the depreciated value (₹12 lakh, i.e., ₹20 lakh – ₹8 lakh), is negative.
In case the depreciated value in the above example remains the same at ₹12 lakh and the selling price is ₹15 lakh, in that case, GST will be payable on the margin of the supplier i.e., on ₹3 lakh @18%.
Illustration 2:
Suppose a registered person is selling an old and used vehicle to any person at ₹10 lakh, where the purchase price of the vehicle by the registered person was ₹12 lakh, then he is not required to pay any GST as the margin of the supplier is negative in this case.
In cases where the purchase price of the vehicle was ₹20 lakh and the selling price is ₹22 lakh, GST will be payable on the margin of supplier, that is, ₹2 lakh.
