---
title: "New GST on Used Cars 2026: 12% / 18% Rate on Second-Hand Cars"
description: "New GST rate on used cars in 2026 is 12% to 18% on second-hand cars based on engine size. Apply the correct GST rate automatically with Busy on every invoice."
canonical: "https://busy.in/gst-rates/used-cars/"
author: "Apurva Maheshwari"
published: "2025-04-23T11:31:37.000Z"
category: "GST Rates"
---

-   GST on used cars applies when vehicles are sold by registered dealers or businesses, with tax generally calculated under the margin scheme.
-   Under the margin scheme, GST is charged on the dealer’s margin value (selling price minus purchase price, subject to applicable rules), not the full sale price.
-   Individual-to-individual sale of used cars does not attract GST.
-   Dealers must follow applicable GST rules for valuation, invoicing, and compliance.
-   Input Tax Credit availability depends on the nature of the transaction and applicable GST provisions.

# GST on Used Cars in India: Rules, Rates & Applicability Explained

Thinking of buying or selling a used car? Whether you’re purchasing from a dealership or selling your old vehicle, understanding the GST (Goods and Services Tax) implications is crucial. The GST rules for **used or second-hand vehicles** are different from those on new cars. This article covers the tax rates, exemptions,  [**HSN codes**](https://busy.in/hsn/) , and how GST affects pricing for pre-owned vehicles in India.

## Is GST Applicable on Used Cars?

Yes, GST is applicable on the **sale of used cars**, but the tax structure is different from that of new vehicles. The government introduced **special rates in 2018** to ease the burden on buyers and promote the resale market.

## GST Rates on Used Cars

The GST rate depends on the **engine size and fuel type** of the car being sold. Here’s a breakdown:

## New GST Rate on Vehicles in India

The revised GST rates applicable from **22 Sep 2025** are provided below for used vehicles.

## New GST Rate on Used Vehicles

| Type of Vehicle | GST Rate | Conditions |
| --- | --- | --- |
| Used petrol cars | **18% on margin value** | GST applicable when sold by registered dealer under applicable margin scheme |
| Used diesel cars | **18% on margin value** | GST applicable when sold by registered dealer under applicable margin scheme |
| Used SUVs and other vehicles | **18% on margin value** | GST applicable when sold by registered dealer under applicable margin scheme |
| Used electric vehicles (EVs) | **18% on margin value** | Subject to applicable GST rules |

**Note:** These rates apply only if the seller is a **GST-registered dealer** and hasn’t claimed an **input tax credit (ITC)** on the car when it was purchased.

## Old GST Rate on Used Vehicles

**(Old GST Rates – Applicable Until 21st September)**

GST on used vehicles sold by registered dealers was applicable under the **margin scheme**, where tax was charged on the dealer’s margin instead of the full selling price, subject to applicable conditions.

| Type of Vehicle | GST Rate | Conditions |
| --- | --- | --- |
| Used petrol cars | **18% on margin value** | Applicable when sold by eligible GST-registered dealers under margin scheme |
| Used diesel cars | **18% on margin value** | Applicable when sold by eligible GST-registered dealers under margin scheme |
| Used SUVs and other vehicles | **18% on margin value** | Applicable when sold by eligible GST-registered dealers under margin scheme |
| Used electric vehicles (EVs) | **18% on margin value** | Applicable when sold by eligible GST-registered dealers under margin scheme |

**Note:** These rates apply only when the seller is a GST-registered dealer and has not claimed Input Tax Credit (ITC) on the vehicle when it was purchased.

## HSN Code for Used Cars

Used cars are categorized under **HSN Code 8703**, the same as motor vehicles. GST applicability depends on the applicable margin scheme rules.

| Vehicle Type | HSN Code | GST Rate |
| --- | --- | --- |
| Vehicle Type | HSN CODE | GST RATE |
| Used Petrol Cars | 8703 | **18% on margin value** |
| Used Diesel Cars | 8703 | **18% on margin value** |
| SUVs & Other Used Vehicles | 8703 | **18% on margin value** |

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## What About Individual-to-Individual Sales?

When a **private individual sells a car to another private person, no GST is applicable**. GST is only charged when the sale is made by:

-   A used car dealer
-   A car leasing company
-   A business registered under GST

So, if you sell your personal car to a friend, you **don’t need to pay any GST**.

## Margin Scheme for Used Car Dealers

Registered dealers selling used cars without claiming ITC can opt for the **margin scheme**:

-   GST is charged **only on the profit margin**, not on the full selling price.
-   Margin = Sale price – Purchase price
-   If the margin is negative (i.e., sold at a loss), **no GST is payable**.

This scheme benefits dealers and makes used cars more affordable for buyers.

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## **Example: GST on a Used Car Sold by Dealer**

Let’s say a dealer bought a used car for ₹4,00,000 and sold it for ₹4,50,000.

-   **Margin = ₹50,000**
-   **GST @18% on margin = ₹9,000**
-   **Total Bill to Buyer = ₹4,50,000 + ₹9,000 = ₹4,59,000**

GST is calculated only on the dealer’s margin under the applicable margin scheme, not on the full selling price.

## **Input Tax Credit (ITC) on Used Cars**

-   If a dealer has claimed ITC on the purchase of a vehicle, the margin scheme conditions may not apply and GST treatment differs.
-   If eligible for the margin scheme, GST is charged on the margin value at the applicable rate.

## Unique Features of BUSY Accounting Software for Used Cars

-   Vehicle-wise inventory tracking for better stock management.
-   Auto-calculation of GST on margin scheme for used vehicles.
-   Commission tracking for agents and sales staff.
-   Detailed vehicle purchase and sale history reports.
-   Integrated service and repair expense tracking.

## Final Thoughts

GST on used cars is designed to keep resale prices reasonable by applying tax only on margins and disallowing ITC-based double taxation. As a buyer or seller, understanding these rules helps you negotiate better and stay compliant. Whether you’re a private owner or a dealer, knowing how GST applies to second-hand cars can save you money and avoid tax-related surprises.

## About the author

**Apurva Maheshwari**

I am a Chartered Accountant with 5 years of experience specializing in GST, income tax, and HSN code classification. I help businesses with GST compliance, tax planning, and financial advisory, ensuring they meet regulatory requirements while optimizing their tax strategies. I aim to simplify GST filings, income tax laws, and HSN code classifications, helping professionals and business owners stay informed and compliant.

## Frequently asked questions

### What is the GST rate on used cars in India?

Used cars sold by eligible GST-registered dealers attract **18% GST on the margin value** under the applicable margin scheme. GST is calculated on the dealer’s margin, not the full sale price.

### Is GST applicable if I sell my car directly to another person?

No. GST is not applicable to individual-to-individual car sales.

### What is the margin scheme?

A special GST scheme for dealers where tax is applied only on the profit margin, not the entire selling price.

### Can I claim ITC on a used car?

ITC is not allowed on cars used for personal or business transport unless used for specific services like training or transportation.

### Is GST applicable on car exchange offers?

Yes. In exchange transactions, GST applies to both the old car (if bought back by dealer) and the new car.

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