No GST for Private Used Car Sales: Explained

I. For Individuals Selling Used Cars: NO GST!

If you sell your second-hand car privately, GST is NOT applicable!

Why?
As per Section 7(1) of CGST Act, 2017, GST applies only when a sale is in the course or furtherance of business.

An individual sells their second-hand car as a private sale, it is not “in the course or furtherance of business.” Hence, it does not qualify as a taxable supply under GST.

II. For Businesses Selling Used Vehicles: GST Applies

As per Notification No. 8/2018-Central Tax (Rate) as amended by Notification No. 4/2025-Central Tax (Rate) a unified rate of 18% GST charged on all categories used vehicles sales.

How is GST Calculated?

Rule 32(5) of CGST Rules, 2017 provides for Margin scheme for person dealing in buying and selling of second hand used vehicles. It applies when a registered person purchases from:
An unregistered person, OR
A seller who did NOT claim ITC on the vehicle

GST is payable on Taxable Value = Selling Price – Purchase Price

if this margin is negative, then GST is not applicable!

If depreciation is claimed under Section 32 of the Income Tax Act, GST is levied on:
Sale Price – Depreciated Book Value (not purchase price).

III. Reverse Charge Mechanism (RCM)
 If a registered used car dealer pays GST under Rule 32(5), they are EXEMPT from RCM on purchases from unregistered sellers. (Notification No. 10/2017-Central Tax (Rate) – 28th June 2017)
 However, if a used vehicle is sold by the Central/State Government, Union Territory, or Local Authority to a registered person, RCM applies! (Notification No. 36/2017-Central Tax (Rate)

 Have questions about GST on used vehicles? Drop them in the comments!