Is the newly announced 18% GST applies on sale of all used cars? Fact Check

A video is making rounds on the social media claiming that Finance Minister Nirmala Sitharaman has announced an increae of Goods and Services Tax (GST) from 12% to  18% on selling old or used cars. Soon after the announcement, the social media is abuzz with claims and counter-claims, following the press meet by the finance minister.

The claim reads:
“As per Sitharaman: I bought my diesel car in 2014 : Rs. 24 lacs
I sold my diesel car in 2024 : Rs 3 lacs 2024
Therefore, I have to pay 18% GST on 21 lacs ! (Margin as per her)”

It has been shared here and here with similar claims.

FACT-CHECK

As the debate is going viral on social media, Digiteye India team found explainers on social media different from what the finance minister said in brief. In her briefing, Finance Minister Nirmala Sitharaman explained it referring to tax on the “margin value” of resales, but mistakenly suggested that individuals selling their used cars would be liable for the tax.  

Our search for news reports reveal that the tax will actually apply to businesses involved in the resale of used vehicles, not private sellers.
Further, we looked out for the official press release by the Government of India on PIB. Under “Other changes relating to goods and services”, the statement said:

“To increase the GST rate from 12% to 18 % on sale of all old and used vehicles, including EVs other than those specified at 18% – Sale of old and used petrol vehicles of engine capacity of 1200 cc or more & of length of 4000 mm or more; diesel vehicles of engine capacity of 1500 cc or more & of length of 4000 mm and SUVs.[Note: GST is applicable only on the Value that represents Margin of the Supplier, that is, the difference between the Purchase price and Selling price (depreciated value if depreciation is claimed) and not on the value of the vehicle. Also, it is not applicable in case of unregistered persons.]”

Essentially, the taxation is based on three specifications:
1. Unregistered person or private individuals who sell their old cars incur 12% GST as before and do not attract the increased 18% GST.
2. Firms which claimed depreciation on old cars attract this GST when they sell them on the ‘Margin of the Supplier’ or the difference between the Purchase price and Selling price (depreciated value if depreciation is claimed) and not on the value of the vehicle.
3. Companies which buy and sell old cars do attract this 18% GST.

See the finance minister’s explanation in this video:

Further example shows that if you buy a car for Rs 12 lakh and sell it to another individual for Rs 9 lakh, no GST applies. But if you are a dealer who buys a car for Rs 9 lakh and sells it for Rs 10 lakh, the 18 per cent GST applies only to the Rs 1 lakh margin.

Hence, the claim that the increased GST is across all sales of old cars is false.

Claim: An 18% GST imposed on all sales of old cars.
Conclusion: Misleading. Individual to Individual sale of old cars attract no GST but dealers reselling old cars or those who had availed depreciation do attract 18% while selling their old cars on the margin.
Rating: Misleading —

About Arun Nag

Arun is with Digiteye India since the beginning as the main source for re-writing copies and re-checking the facts and images. He writes on general and tech issues. He can be reached at arunnag@digiteye.in

Leave a Reply

Your email address will not be published. Required fields are marked *

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.