Everyone is now talking regarding GST rate implementation on many things. In this age of social media, rumors circulate more quickly than news reaches the general public. A deceptive piece of news pertains to GST on pre-owned and secondhand vehicles. If someone is informed that they will sell a car at a loss, and that they must also pay 18% GST, their response will be. This guideline is entirely incorrect.
In fact, it is correct that there has been an alteration in GST rates for used and older vehicles. Previously, it was 12%, but now it has risen to 18%. This choice was made during the GST Council meeting that took place last week.
Currently, the uncertainty revolves around what tax will apply to the sale of an old car, even if it results in a loss. Will the average person also need to pay 18% GST when purchasing or selling any used car? Will there be an 18% tax on the buying and selling of used electric vehicles?
This updated regulation concerning GST for vintage vehicles
Now, let us begin by informing you about the news that is completely false. It is reported that an 18% GST will apply to the profit margin from buying and selling used cars. For instance, if you sell a car purchased for Rs 12 lakh at Rs 9 lakh, then the margin will be 18% GST. The question now is whether an 18% GST will be applicable on a loss of Rs 3 lakh incurred from selling an old car? Individuals are puzzled solely due to this incorrect illustration.
To clear up any confusion in a straightforward way: if you’re selling an old car for less than what you paid for it, you won’t have to pay any tax. For instance, if you bought a car for 12 lakhs and later sold it for 9 lakhs, there’s no tax due, regardless of whether the car is owned by an individual or a company. Essentially, selling a car at a loss means no GST applies.
When it comes to individuals buying or selling old cars, there’s no tax involved, even if they make a profit. Take Pankaj, for example; he bought an old car for Rs 1 lakh and sold it for Rs 1.50 lakh, making a profit of Rs 50,000. However, according to GST rules, Pankaj won’t owe any GST.
So, who will be taxed and where?
In its 55th meeting, the GST Council raised the GST on old cars from 12% to 18%. Previously, used cars under 1200 cc and 4000 mm in length were taxed at 12%. This change also applies to electric vehicles and other types of vehicles, but only for businesses that are GST registered and deal in used cars. Therefore, this rule does not affect regular individuals selling their cars.
Who will be subject to GST?
The government has made it clear that the new GST rate will only apply to those engaged in the business of buying and selling used cars, provided they are GST registered. This means companies like Spinny, Car Trade, Car Dekho, and Car24 will need to pay 18% GST, but they will only be taxed on their profit margin.
