GST on Used Cars in India: Rules, Rates & Applicability Explained
- The used car GST rate is generally 18% on the margin value for eligible taxable sales by GST-registered dealers or businesses.
- Under the margin scheme, GST is generally calculated on the difference between the selling price and purchase price, or the applicable depreciated value where depreciation has been claimed.
- Individual-to-individual sale of a used car generally does not attract GST when the seller is not registered or liable to register.
- Dealers must follow applicable GST rules for valuation, invoicing and compliance.
- To use the margin scheme, ITC should generally not have been claimed on the purchase of the used vehicle.
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 , and how GST affects pricing for pre-owned vehicles in India.
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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 used car GST rate is generally 18% on the margin value for eligible taxable sales by GST-registered sellers under the applicable margin scheme. The rate no longer varies by engine size or fuel type.
GST Rate on Used Vehicles
| Type of Vehicle | GST Rate | Rate Before 22 Sep 2025 | Conditions |
|---|---|---|---|
| Used petrol cars | 18% on margin value | 18% on margin value | Applicable to eligible taxable sales under the margin scheme |
| Used diesel cars | 18% on margin value | 18% on margin value | Applicable to eligible taxable sales under the margin scheme |
| Used SUVs and other vehicles | 18% on margin value | 18% on margin value | Applicable to eligible taxable sales under the margin scheme |
| Used electric vehicles (EVs) | 18% on margin value | 18% on margin value | Applicable to eligible taxable sales under the margin scheme |
Type of Vehicle
GST Rate
Rate Before 22 Sep 2025
Conditions
Type of Vehicle
GST Rate
Rate Before 22 Sep 2025
Conditions
Type of Vehicle
GST Rate
Rate Before 22 Sep 2025
Conditions
Type of Vehicle
GST Rate
Rate Before 22 Sep 2025
Conditions
Note: The uniform 18% rate has applied since 16 January 2025. Before that date, certain old and used vehicles attracted 12%, while specified larger petrol/diesel vehicles and SUVs were already at 18%. GST is generally payable only on the supplier’s margin, not the full sale value.
HSN Code for Used Cars
The commonly searched old car HSN code and GST rate for passenger cars is generally HSN 8703 with 18% GST on the margin value under the applicable margin scheme. The second hand car HSN code depends on the underlying vehicle classification.
| Vehicle Type | HSN Code |
|---|---|
| Used petrol passenger cars | 8703 |
| Used diesel passenger cars | 8703 |
| Used SUVs / passenger vehicles | 8703 |
| Used electric passenger vehicles | 8703 |
| Used goods vehicles | 8704 |
Vehicle Type
HSN Code
Vehicle Type
HSN Code
Vehicle Type
HSN Code
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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.
