18% GST on all Old and Used Vehicles: Notification No. 04/2025-Central Tax (Rate)

Date: January 16, 2025
Issued By: Ministry of Finance, Department of Revenue
Effective Date: Immediate

The CBIC, through Notification No. 04/2025-Central Tax (Rate), has implemented changes to the GST rate structure for the sale of old and used vehicles, following recommendations from the 55th GST Council Meeting held on December 21, 2024. These amendments are aimed at standardizing tax rates and improving revenue compliance within the automobile resale sector.

Key Changes Introduced

GST Rate Increase on Old and Used Vehicles

• The GST rate on the sale of all old and used vehicles (including EVs), except those already taxed at 18%, has been increased from 12% to 18%.
• The change is applied to the margin value, not the total value of the vehicle.

Margin-Based Taxation Mechanism

The GST is levied on the margin of the supplier, defined as:

• Margin = Selling Price – Purchase Price (depreciated value if depreciation is claimed).
• This ensures that GST is not levied on the full value of the vehicle, minimizing the tax burden on end consumers.

Exclusions from Applicability

GST on the sale of old and used vehicles is not applicable in the following cases:

• Transactions by unregistered persons.
• Specific vehicle categories already taxed at 18%:
  • Old petrol vehicles with engine capacity ≥1200 cc and length ≥4000 mm.
  • Old diesel vehicles with engine capacity ≥1500 cc and length ≥4000 mm.
  • SUVs meeting prescribed criteria.

Objectives of the Amendment

1. Revenue Augmentation:
   • Aligning the tax rate with other goods/services taxed at 18% increases government revenue.
2. Uniformity in Taxation:
   • A single rate for most old and used vehicles reduces classification disputes.
3. Encouraging Compliance:
   • Margin-based taxation ensures fairness and clarity, reducing tax evasion.

Similar Notifications Under IGST and UTGST Acts

Parallel notifications have been issued under the Integrated Goods and Services Tax Act, 2017 (IGST Act) and the Union Territory Goods and Services Tax Act, 2017 (UTGST Act) to ensure consistent implementation across all jurisdictions.

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