Union Finance Minister Nirmala Sitharaman has been under the scanner of social media and facing criticism from the left, right, and center after the conclusion GST Council Meet. At first FM Sitharaman was slammed by opposition and social media users for GST on popcorn, the controversy intensified after the council recommended an 18 percent GST rate on the margin value of used car sales. Among the most common discussions on GST on used cars among social media users is whether they will be taxed even though they are making losses while reselling their cars.
GST on used and old cars: What does the GST council recommend?
After the GST Council meeting, Finance Minister Nirmala Sitharaman said that GST on used and old cars (petrol and diesel vehicles with capacity of 1200 cc or more, 4000 mm or more in length, vehicles with engine capacity of 1500 cc or more) has been increased from 12% to 18%. EVs and other vehicles have also been included in this. But, this will apply only to those doing GST-registered used car business. This means that this rule will not apply to the sale of cars by the common man.
Now the question arises whether GST will be levied even on selling cars in the negative i.e. on a loss?
This question has also been clarified by PIB saying that if a person doing a used car business (who is GST registered) sells it and incurs a loss, that is, he sells the car at a loss, then he will not have to pay GST. GST will have to be paid only on the margin. Example- If someone buys a car for 5 lakhs and after properly painting it, sells it to a customer for 6 lakhs, then his profit will be 1 lakh rupees. In such a case, 18% GST will have to be paid on 1 lakh rupees, not on the entire 6 lakhs. On the other hand, if he sells a car worth 5 lakhs for 4.50 lakhs, then no GST will have to be paid.
On whom will this GST be imposed?
The government clarified that this GST rate will be imposed only on those who do the business of buying and selling used cars. The condition is that they must be GST registered. For example - companies selling used vehicles Spinny, Car Dekho, Car24, Olx, etc.
Will it have any effect on the common man?
If a common citizen sells a used car or vehicle, then no GST will be applicable to it. 18% GST will be applicable only on GST-registered persons selling for business purposes.