The GST Council announced that starting December 21, 2024, an 18% GST will apply to the sale of all used cars, including electric vehicles (EVs). However, this tax is only applicable to registered businesses involved in buying and selling used vehicles. When individuals sell used cars to each other, no GST is required.
The GST is calculated on the margin, which is the difference between the selling price and the depreciated value of the vehicle. For example, if a registered business sells a used car for Rs 10 lakhs, with a purchase price of Rs 20 lakhs and depreciation of Rs 8 lakhs, no GST is payable because the margin is negative. However, if the selling price is Rs 15 lakhs, GST will be payable on the margin of Rs 3 lakhs at 18%, amounting to Rs 54,000.
This change aims to simplify the tax structure, as previously different GST rates applied to used vehicles and EVs. The new unified rate is expected to streamline the process for businesses.