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GST Impact on Used Car Prices and Used Car Valuation in India

GST Impact on Used Car Prices and Used Car Valuation in India

GST is all set for roll out from July 2017 and going to Impact Used Cars. Know how will Used Car Valuation Price changes in GST on both Sale and Purchase Transactions

 

GST on Used Cars

GST is all set for roll out on 1st July 2017 and if concerned on Impact of GST on Used Car Valuation and Price Impact on Sale and Purchase through Dealer or Direct Sale, you can foresee the impact here detailed Point Wise

1) Sale and Purchase among Individual: There will not be any GST if you are doing Second Hand Car Transaction among Individuals. Been  neither the buyer and nor seller has to be worried about GST in any form. As this is not a business deal, hence no GST will be required to be paid

2) Sale by Individual and Bought by Dealer: If you are an Individual and selling your Used Car to a Dealer then as Individual there is no GST Liability. Also for Dealer as this is not a complete transaction (been transaction is completed when he sells the car which is been purchased by him) – so no GST will be payable by him too

3) Sale by Dealer and Bought by Individual: If you are an Individual and buying Used Car from a Dealer then again no GST Liability for the Individual. But – Dealer who is selling the used car yes has a GST Liability to be paid and this is how he will pay

a) Tax: The GST Liability will be computed based on the existing slabs which is

28% + 1% Cess  - Petrol Cars with Engine less than 1.2 Litre

28% + 3% Cess – Diesel Cars with Engine less than 1.5 Litre

28% + 15% Cess – All Other Cars

Yes - as per recent update in 3rd Week of July only 28% (without any extra cess) and this will be charged on the margin 

b) Computation: The GST Liability however will not be computed on the transaction amount, but rather on the margins which the Dealer makes. So for Instance – if dealer buys a 8 Year Old Diesel Car with 1.5 Litre Engine car worth Rs 2 Lakh and sell it for Rs 2.4 Lakh to Individual then his final liability of GST would be 28% on Rs 40000 margin

4) Sale and Purchase among Dealer: Even if the Used Car Dealer is selling Car to another Used Car Dealer. Say Dealer A selling car to Dealer B then GST Liability would be of Dealer A from the margin he is making on the Used Car Purchase


If Looking to Sell Used Car - Sell Car Online

If Looking to Buy Used Car - Buy Second Hand Car

If Looking to Check Valuation - Used Car Valuation Price


Queries on GST Impact on Second Hand Car Valuation Price 

Q, Will there be any Impact on Valuation price of Used Car at time of Selling due to GST

A. No – Absolutely in no way been GST will impact the Fair Valuation Price of Used Car. See if you are selling to Individual then GST will not be borne by either and even if selling to Dealer – then GST will be charged only from the margin Dealer is making from the purchase.

For Instance – if Dealer makes a margin of Rs 30000 from the transaction then he will automatically increase the sale value of car by adding up GST Tax in it. Thus for a Rs 2 Lakh Car which he selling for Rs 2.3 Lakh in post GST Scenario he may sell it for Rs 2.4 Lakh

Q. If I buy Car from Dealer, will I get a higher Priced Car

A. Partially – been GST will be on the Margins. Generally a Dealer tries to make 10% to 15% Mark up Profit on small Cars and around 8% to 10% on Higher Priced Cars. Been GST will be added up on the margins. Expect the Final end Dealer price to increase marginally

For Instance – suppose a Dealer selling you 2011 Make Honda City for Rs 5 Lakh, which he has bought for Rs 4.5 Lakh – the price post GST will increase to 5.14 Lakh by Dealer. Of this - Dealer will pay 28% Tax on his margin of Rs 50000, effectively taking net margin closer to Pre GST Scenario.

So – yes a slight increase in price is expected if to buy Used Car from Dealer when GST will roll out from July 2017.

So for Organized Market - the prices likely to increase marginally due to GST Roll out from July 2017

Q. I am a Dealer, do i need to pay GST on every Car Sold

A. GST in Used Car is to be paid only on the Margin, which is the difference in Purchase Price and Sale Price. However - the Margin should always be Positive, means GST is payable if you have made Profit on sale of Car

However - where the Margin is negative due to any reason then no GST is payable on sale of car. The same is as per Section 32(5) of CGST as incorporated.

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Important: If you seek advise or recommendation, pls raise query in Car Forum instead of posting in comments

 

Comments 8

Guest - Irfan on Wednesday, 15 November 2017 11:32

I have Taken A car from my company and The Company on my brhalf paid the amount and the company has A policy to pay 85% before 1 year if i leave the job and Want to close the car policy.
The comany is telling me to pay 28% GST + 3% Cess. On the Actual price the Car was Bought.
Is it correct...plz help

I have Taken A car from my company and The Company on my brhalf paid the amount and the company has A policy to pay 85% before 1 year if i leave the job and Want to close the car policy. The comany is telling me to pay 28% GST + 3% Cess. On the Actual price the Car was Bought. Is it correct...plz help
Guest - Raman Varma on Friday, 01 September 2017 17:46

Buying a car is dream harboured by many. But with rising prices of all commodities it seems highly unlikely that one can fulfil this dream in the coming future. The new tax imposed by the Government GST have led to the reduction of prices for a commodities whereas the prices of others have gone up. This article gives you the repercussions of GST on used car prices. I like the way that the article simplifies the issue by classifying the matter into different categories depending on the type of buyer and seller. Used cars are life saver for many as it pinches a smaller hole in your pocket but buyers as well as sellers were concerned whether this imposed GST will make their lives difficult. But this article clarifies the issue. If the sale is between individuals it doesn’t involve any GST being applicable for the transaction. If you are planning to sell your used car to a dealer this too won’t have any GST being applied in the process. In case of a sale made by a dealer to an individual then the dealer is liable to pay a 28% GST but no extra cess tax has to be paid. The best part about the article is how it clarifies any doubt the customer may harbour about used car valuation. Whether you are buying used car or selling them it is imperative that you carry out a proper used car valuation. Now with the GST coming into the loop the potential buyers and sellers are faced with a lot of doubt regarding the effects of GST on the process. The article does its best to help the people in the process by answering the basic questions and eliminating any doubt that one may have.

Buying a car is dream harboured by many. But with rising prices of all commodities it seems highly unlikely that one can fulfil this dream in the coming future. The new tax imposed by the Government GST have led to the reduction of prices for a commodities whereas the prices of others have gone up. This article gives you the repercussions of GST on used car prices. I like the way that the article simplifies the issue by classifying the matter into different categories depending on the type of buyer and seller. Used cars are life saver for many as it pinches a smaller hole in your pocket but buyers as well as sellers were concerned whether this imposed GST will make their lives difficult. But this article clarifies the issue. If the sale is between individuals it doesn’t involve any GST being applicable for the transaction. If you are planning to sell your used car to a dealer this too won’t have any GST being applied in the process. In case of a sale made by a dealer to an individual then the dealer is liable to pay a 28% GST but no extra cess tax has to be paid. The best part about the article is how it clarifies any doubt the customer may harbour about used car valuation. Whether you are buying used car or selling them it is imperative that you carry out a proper used car valuation. Now with the GST coming into the loop the potential buyers and sellers are faced with a lot of doubt regarding the effects of GST on the process. The article does its best to help the people in the process by answering the basic questions and eliminating any doubt that one may have.
Guest - khanns on Wednesday, 23 August 2017 14:04

whether gst will be applicable on sale of used car (swift) by registered manufacturer of footwear.

whether gst will be applicable on sale of used car (swift) by registered manufacturer of footwear.
Guest - Chetan davey on Thursday, 17 August 2017 18:39

I have a query on sale of used car by a private company to an employee. In my case company provides car to employee and after 5 years it gets transferred in to the name of employee. So my query is at the point of sale will there be any GST for this sale from company to employee

I have a query on sale of used car by a private company to an employee. In my case company provides car to employee and after 5 years it gets transferred in to the name of employee. So my query is at the point of sale will there be any GST for this sale from company to employee
Guest - Kuttappan EV on Tuesday, 01 August 2017 08:25

If I purchase a used car through auction from a govt establishment, what amount will be the GST to be paid. can we treat this transaction as individual to individual category since this establishment is not a car dealer, actually govt disposing this vehicle very lesser amount than purchased price. In which category this transaction lie. and what is the % of GST to be paid

If I purchase a used car through auction from a govt establishment, what amount will be the GST to be paid. can we treat this transaction as individual to individual category since this establishment is not a car dealer, actually govt disposing this vehicle very lesser amount than purchased price. In which category this transaction lie. and what is the % of GST to be paid
Guest - Guest on Wednesday, 26 July 2017 16:36

Hi,

Could you please confirm whether GST will be applicable when a company owned second hand car is sold to authorised car company dealer. If yes, then what would be the GST %.


Hi, Could you please confirm whether GST will be applicable when a company owned second hand car is sold to authorised car company dealer. If yes, then what would be the GST %.
Guest - John on Tuesday, 25 July 2017 14:14

What about if we buy a car from a Company (not a dealer). I mean if a Company selling their old used vehicles to Individual or other company or firm.

What about if we buy a car from a Company (not a dealer). I mean if a Company selling their old used vehicles to Individual or other company or firm.
Guest - Ajay Munde on Saturday, 01 July 2017 15:40

I think Govt needs to rethink about GST on Used Car thru organized sector. I got few questions to support the issue.
1. Will the customer bear GST for used car purchased from Dealer?
2. Will the Used car dealer will be able to pay GST @ 29%, 31% or 43% on his gross margins of say 20000-40000? Impact will be min 10000 to 20000 depending upon margin or vehicle model
3. What will happen to Used car market of SUV and Premium cars where impact will be 43% and Vehicle price will be 10 lacs and margins will be Rs 1 lacs @ 10%. The GST will be 43000/-. Will dealer pay Rs 43000/- from his gross margin or charge 43000/- additional to customer.
4. It may enhance business of Park and Sale
5. Does Organized business will collapse and individual to individual transactions thru platforms like OLX will increase to avoid huge GST burden..
6. Does it will give rise to unorganized sector where transactions will not be disclosed to authority..

Hope Govt thinks over these points and issue!

I think Govt needs to rethink about GST on Used Car thru organized sector. I got few questions to support the issue. 1. Will the customer bear GST for used car purchased from Dealer? 2. Will the Used car dealer will be able to pay GST @ 29%, 31% or 43% on his gross margins of say 20000-40000? Impact will be min 10000 to 20000 depending upon margin or vehicle model 3. What will happen to Used car market of SUV and Premium cars where impact will be 43% and Vehicle price will be 10 lacs and margins will be Rs 1 lacs @ 10%. The GST will be 43000/-. Will dealer pay Rs 43000/- from his gross margin or charge 43000/- additional to customer. 4. It may enhance business of Park and Sale 5. Does Organized business will collapse and individual to individual transactions thru platforms like OLX will increase to avoid huge GST burden.. 6. Does it will give rise to unorganized sector where transactions will not be disclosed to authority.. Hope Govt thinks over these points and issue!
Guest
Friday, 20 September 2019

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