New GST rule on old car
There are many misleading news floating on social media regarding charging GST on old vehicles. Actually, there is news going on social media that if you sell your old car even at a loss, you will have to pay 18% GST. This news came to light after the GST Council meeting. The GST Council has increased the GST rate on used and old cars from 12% to 18%. After this, various types of fabricated news are spreading through social media. If you are also worried after seeing or reading those news, then become tension free now. We are answering all your questions.
Q. Do I have to pay GST on selling an old car?
A. No, if you sell your old car to another person then you will not have to pay GST.
Q. Will the price of an old car increase after the imposition of 18% GST?
A. When the buyer buys an old car from an individual, there will be no GST on the sale. However, if he buys a second-hand vehicle from platforms like CarDekho, OLX, showroom or dealer, tax will have to be paid. Let us understand this with an example. If a used car platform buys a car for ₹1 lakh. If it is sold for ₹ 1.4 lakh after denting and painting, then 18 percent GST will have to be paid on the margin. That means 18% GST will be applicable on earnings of ₹ 40,000. Earlier, 12 percent GST was applicable on margin. This increase is likely to increase the price of old cars.
Q. What will be the GST on old electric vehicles (EV)?
A. There will be 18 percent GST on the sale of used vehicles, including electric vehicles (EVs) and SUVs.
Q. Who will be most affected by 18 percent GST?
A. The increase in GST on used cars from 12 per cent to 18 per cent is likely to impact car dealers and used car platforms the most.
Q. How is GST calculated on used cars?
A. Let us understand by example. A person sold an old car to another person for ₹10 lakh. The purchase price of that car was ₹20 lakh. Under the Income Tax Act, he has claimed depreciation of ₹8 lakh. In this case, he will not have to pay any GST. If he bought the car for ₹12 lakh and sold it for ₹15 lakh, he would have to pay GST. In this case, GST will have to be paid at the rate of 18 percent on the margin, i.e. ₹3 lakh.
Q. What will be the impact on used car dealers/businesses?
A. The increase in GST rate is likely to affect the business of used car dealers. The increase in GST rate from 12 percent to 18 percent, i.e. an increase of 50 percent, will have a negative impact on the used car dealership industry. According to a report by India Blue Book, used car dealers sold about 51 lakh units of used cars in the financial year 2022-23, which was much more than the 42.3 lakh new cars sold in the same period.
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