Category: GST
Here’s the updated rule for GST on the sale of used vehicles in business, particularly when Input Tax Credit (ITC) was taken when the vehicle was purchased:
If a business had availed ITC upon purchasing a vehicle, the sale of that used vehicle attracts:
GST at 28% on the full selling price, not merely on the profit margin.
Compensation cess of up to 22%, depending on the type of vehicle—and this also applies to the full sale value.
All this applies even if the sale occurs after five years of purchase.
In summary, when ITC has been taken, the margin scheme cannot be used, and higher taxation applies based on the entire sale value.
Suppose a business bought a vehicle and took ITC. Later, it sells that vehicle:
Sale Price: ₹10 lakhs
GST: 28% of ₹10 lakhs = ₹2.8 lakhs
Cess: Up to 22% as applicable (on ₹10 lakhs)
| Scenario | ITC Claimed? | GST Basis | GST Rate | Cess |
|---|---|---|---|---|
| Vehicle used for business, ITC claimed | Yes | Full sale price | 28% | Up to 22% |
| Vehicle used for business, ITC not claimed | No | Margin (sale price – depreciated or purchase value) | 18% | 0% |
| Private sale (individual to individual) | — | Not applicable (GST exempt) | — | — |
If ITC was not claimed, the selling business can use the margin scheme, applying 18% GST on profit margin only, with no cess and no ITC allowed on resale.
Private sales between individuals (non‑GST registered sellers) are exempt from GST, regardless of margin or ITC.
With ITC claimed — GST is high: 28% + cess up to 22%, on the entire sale value.
Without ITC claimed — GST is 18% on margin only, no cess.
Private individual sales — No GST applies.