GST on Used Cars in India: Rules, Rates & Applicability Explained
- 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.
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 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 |
Type of Vehicle
GST Rate
Conditions
Type of Vehicle
GST Rate
Conditions
Type of Vehicle
GST Rate
Conditions
Type of Vehicle
GST Rate
Conditions
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 |
Type of Vehicle
GST Rate
Conditions
Type of Vehicle
GST Rate
Conditions
Type of Vehicle
GST Rate
Conditions
Type of Vehicle
GST Rate
Conditions
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 |
Vehicle Type
HSN Code
GST Rate
Vehicle Type
HSN Code
GST Rate
Vehicle Type
HSN Code
GST Rate
Vehicle Type
HSN Code
GST Rate
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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.
