New Delhi, December 24,Recent debates on social media have brought attention to the application of Goods and Services Tax (GST) on the sale of used cars in India. Many users seem confused about whether GST is levied on the car’s depreciation, profit margin, or even in cases where there is a financial loss.
To clarify, GST is applicable when dealers sell used cars, but it is calculated on the profit margin rather than the total transaction value or the loss incurred. This ensures the tax burden is fair and based only on the added value. For example, if a dealer buys a used car for ₹5 lakh and sells it for ₹5.5 lakh, GST is levied only on the ₹50,000 margin. However, if the car is sold at a loss, no GST is charged since there is no profit margin to tax.
Importantly, GST is not applicable to private sales between individuals. These transactions are considered outside the scope of GST as they do not involve registered dealers or taxable supply.
The confusion likely stems from misinterpretations of the margin scheme under GST, which aims to simplify taxation on second-hand goods, including used cars. Understanding these nuances is essential for both buyers and sellers to avoid misconceptions about paying “tax on losses.”
This GST framework ensures a balanced approach, promoting transparency while preventing undue taxation in the used car market.
