Goods and Services Tax (GST) in India has a significant impact on the sale and purchase of used or second-hand products. Understanding the GST framework for these transactions is crucial for both businesses and consumers.
Under the GST regime, the taxation of used goods primarily hinges on two factors:
Margin Scheme: This allows GST to be levied only on the profit margin (i.e., the difference between the selling and purchase prices) when certain conditions are met.
Input Tax Credit (ITC): If a seller has claimed ITC on the purchase of used goods, the sale is subject to standard GST provisions.
The Margin Scheme is particularly beneficial for businesses dealing in used goods, as it reduces the overall GST liability.
The GST rates on used cars depend on the engine capacity and fuel type:
| Vehicle Type | GST Rate |
|---|---|
| Petrol cars (up to 1200 cc) | 12% |
| Petrol cars (over 1200 cc) | 18% |
| Diesel cars (up to 1500 cc) | 12% |
| Diesel cars (over 1500 cc) | 18% |
| Luxury cars and SUVs | 18% |
As of December 2024, the GST Council has set a uniform 18% GST rate on the margin value for used EVs sold by registered businesses. This change aligns the taxation of used EVs with that of non-electric vehicles. Private transactions between individuals remain exempt from GST.
For second-hand electronic items like smartphones, laptops, and home appliances, the applicable GST rate is 18%. Dealers can avail the Margin Scheme, applying GST only on the margin, to make resale prices more competitive. Taxaj
The sale of used furniture is subject to an 18% GST rate. Applying the Margin Scheme helps reduce the overall tax liability, making the resale of furniture more viable for businesses.
To benefit from the Margin Scheme, the following conditions must be met:
Registered Dealer: The seller must be registered under GST.
No ITC Claimed: The seller should not have claimed Input Tax Credit on the purchase of the used goods.
Minor Processing: The goods should be sold as such or after minimal processing that does not alter their essential nature.
Unregistered Supplier: The goods should be obtained from an unregistered person.
Taxable Supply: The supply made by the unregistered person should be a taxable supply.
Location: The supply obtained should have occurred within the taxable
These conditions ensure that the Margin Scheme is applied correctly, benefiting both the seller and the buyer.
Under Rule 32(5) of the CGST Rules, the value of supply for second-hand goods is determined as:Taxaj+3IndiaFilings+3TaxGuru+3
Value of Supply = Selling Price – (Purchase Price + Minor Repairing Cost).
If the difference is negative, it is ignored, and the value of supply is considered zero.
| Product Category | GST Rate | Margin Scheme Applicable | Notes |
|---|---|---|---|
| Used Cars | 12%–18% | Yes | Based on engine capacity and fuel type |
| Used Electric Vehicles | 18% | Yes | Applies to registered businesses only |
| Used Electronics | 18% | Yes | Includes smartphones, laptops, etc. |
| Used Furniture | 18% | Yes | Applies to second-hand furniture |
Understanding the GST applicability and tax rates on used products is essential for businesses and consumers involved in the resale market. The Margin Scheme offers a simplified taxation method, reducing the GST burden on profit margins. By adhering to the stipulated conditions and staying informed about the latest GST provisions, stakeholders can navigate the used goods market effectively