While the brand new automobiles are being taxed with GST in the new system implemented across the country from 1st July 2017, GST on sale of used cars or any used vehicles by individuals or unregistered suppliers won’t be taxed.

The Revenue Department clarified that GST on sale of used cars by individuals will not be implemented as the sale is not for furthering any business.

Revenue department officials said the similar principal will be valid as per the GST on sale of used cars or old cars and no GST will be payable even though the supply would be for a consideration.

The department stated that the said section has to be read in conjunction with another section. And even though the sale of old vehicles by an individual is a concern, it cannot be said to be as selling old cars is not the business of the said person, and hence does not qualify to be a supply per se. However, it said that the GST on sale of used cars or vehicles would be applicable if an unregistered business sells four-wheelers or two-wheelers to the registered supplier (who buys or sells in furtherance of his business).

Currently, in India several automakers sell pre-owned cars through their dedicated used car selling platforms. Apart from that a large number of used vehicles are marketed by unregistered local suppliers and individuals as well. Under the new tax system, these local unregistered operators and individual sellers would play major role in the pre-owned car market.

India is one of the biggest cars markets in the world and it is growing fast. Alongside the new cars, used cars market is also booming for last couple of years. Speaking about the new cars, the prices of the vehicles have become cheaper after the implementation of the new tax structure. Smaller cars have received marginal price cuts, while the big SUVs, luxury vehicles have received major price slash.

Now that there is clarity of GST on sale of used cars or old cars, wherein, GST is not applicable if there is no business interest in the sale of his old car or bikes, potential buyers require making note that any sales of registered used car or bike sales outlet will attract GST.

Also check the impact of GST on Car Prices in India.