GST taxability on sale of used vehicle by company and unregistered person

The sale of old vehicle attracts different GST Rates based on type of vehicle and person selling the vehicle.

1) Unregistered person -

The sale of used vehicle by unregistered person is not classified as "outward supply" in terms of GST as it is not for the furtherance of business. The definition of "outward supply" in GST is reproduced below-

"outward supply" in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business;

Hence, there is no GST when a used car is sold by an unregistered person.

2) Registered person -

Tax Rate (If ITC is not availed):

In case of sale of used vehicle by registered person if the ITC is not availed, the rate of tax is 18% or 12%, refer to Notification No. 8/2018 -Central Tax (Rate) for details. Also the cess is reduced to Nil, refer Notification No. 1/2018-Compensation Cess (Rate).

Tax Rate (If ITC is availed):

In case of sale of used vehicle by registered person if the ITC is availed, the rate of tax will be as per the rate of new vehicle with applicable cess.

Taxable Value:

• If the Depreciation under Income Tax is availed, the value shall be the difference between Sale consideration and Written down value of the vehicle.
• In all other cases, the value shall be the difference between sale price and purchase price of the vehicle.

In case of negative taxable value, it may be ignored. Also note that reversal of ITC is not required for negative taxable value as it is not considered as exempt supply.

3) Government -

In case of sale of used vehicles by Central Government, State Government, Union territory or a local authority, the recipient is liable to pay GST under RCM if the recipient is registered. If the recipient is unregistered person, the Government has to pay under forward charge.