Recently there was a huge controversy on social media regarding a decision of the government. The GST Council had decided to impose 18% GST on the sale of second hand (old) cars. This decision has been heavily criticized on social media. Now an expert related to this matter has given clarification on this and told who will have to pay GST on selling second hand car and who will not.
GST issue on sale of second hand car
According to the GST Council, petrol and diesel vehicles with engine capacity of 1200CC or more, vehicles with length of 4000mm or more, and vehicles with engine capacity of 1500CC or more come under this decision. Apart from this, sale of electric vehicles (EV) is also included in this rule. Finance Minister Nirmala Sitharaman had explained this decision in detail in a press conference.
However, this decision of the government was not liked by some people and many questions were raised regarding it on social media. Now experts have said that GST on selling a second hand car will have to be paid only when the seller makes margin (profit).
GST will have to be paid only on earning margin
An expert clarified that the registered unit will have to pay GST on the sale of an old vehicle only if the seller makes any profit on the sale. “Margin” means the profit left after deducting depreciation of the vehicle from the selling price.
These people will not have to pay GST
If a person sells an old car to another person, then GST will not be charged on it. GST will be levied only if a registered entity has claimed depreciation under the Income Tax Act 1961 and the seller has the benefit of margin.
If such “margin” value is negative (i.e. the seller is incurring a loss), then no GST will be charged on it. This may affect companies like Spinny, Cars24, and second hand car dealing companies like Olx. Overall, the determination of GST on the sale of a second hand car will depend on how much profit the seller is making. If the seller receives margin, GST will be levied only on that.