The GST Council has introduced an 18% Goods and Services Tax (GST) on the sale of old and used vehicles, including electric vehicles (EVs), but the tax will only apply under specific conditions. The tax will be levied only on the margin, which refers to the difference between the selling price and the depreciated value of the vehicle. If the selling price is lower than the depreciated value, no GST will be charged. This ensures that only transactions where the seller makes a profit are subject to GST.
A registered person will be liable to pay GST only if the sale price of the old vehicle exceeds the depreciated value of the vehicle. For example, if a used vehicle was originally purchased for Rs 20 lakh and the seller has claimed depreciation of Rs 8 lakh under the Income Tax Act, the depreciated value of the vehicle would be Rs 12 lakh. If the seller sells the vehicle for Rs 10 lakh, which is lower than the depreciated value, there is no GST payable as the margin is negative.
Additionally, if an individual sells a used car to another individual, no GST is applicable. The sale of old vehicles will now be subject to a uniform GST rate of 18%, whereas previously, the rate was variable depending on the type of vehicle. This move by the GST Council is aimed at simplifying the taxation process on used vehicles and ensuring that tax is only paid on transactions where there is a margin of profit.
