GST on Second-Hand Goods — Margin Scheme (Rule 32(5)), Used Cars & Individual Seller Rules

Updated: 3 June 2026 | Rule 32(5) CGST Rules | Notification 8/2018-CT(Rate)

GST on second-hand goods is charged only on the profit margin (selling price minus purchase price) under the Rule 32(5) margin scheme — not on the full transaction value. Registered dealers buying used goods from unregistered individuals pay GST only on their profit. Individuals selling personal used goods (car, phone, furniture) are not liable for GST if they are not registered under GST. Used car dealers pay 12% or 18% on margin under Notification 8/2018.

Margin Only

Rule 32(5): GST on second-hand goods is computed on (Selling Price − Purchase Price), not the full selling price.
If margin is zero or negative — no GST payable. Applicable when goods bought from unregistered persons (individuals/consumers).

Rule 32(5) Margin Scheme — How GST on Second-Hand Goods is Calculated

Rule 32(5) of the Central Goods and Services Tax Rules, 2017 provides a special valuation method for dealers in second-hand goods. Under this scheme:

Step	Example
Purchase price of used goods from individual	₹50,000
Selling price to next buyer	₹65,000
Taxable margin (selling − purchase)	₹15,000
GST rate applicable (e.g., 18%)	18%
GST payable on margin	₹2,700
GST on full value (without scheme)	₹11,700
Tax saving under margin scheme	₹9,000

Condition: The dealer must have purchased the goods from an unregistered person. No ITC is available on such purchases. If the purchase price exceeds or equals the selling price, no GST is payable.

GST on Used / Old Cars — Notification 8/2018-CT(Rate)

Vehicle Category	Specification	GST Rate on Margin
Small petrol car	Engine ≤ 1200cc AND length ≤ 4000mm	12%
Small diesel car	Engine ≤ 1500cc AND length ≤ 4000mm	12%
Larger petrol/diesel cars, SUVs	Engine > 1200cc (petrol) / > 1500cc (diesel) OR length > 4000mm	18%
Electric vehicles (used)	All EVs	12%

These reduced rates (vs 28% on new cars) apply only to registered dealers in used vehicles using the margin scheme. If the dealer claims depreciation under Income Tax Act on the vehicle and the margin is calculated after depreciation, separate valuation rules apply.

Who Pays GST on Second-Hand Goods — Seller Matrix

Seller Type	Buyer Type	GST Applicable?	Basis
Individual (unregistered)	Anyone	No	Not in course of business; no GST registration
Registered dealer	Any buyer	Yes — on margin	Rule 32(5) margin scheme
Registered dealer	Another registered dealer	Yes — full value	Normal GST with ITC; margin scheme N/A
Unregistered business (below ₹40L threshold)	Anyone	No (unless liable to register)	Below registration threshold

Frequently Asked Questions

Is GST applicable on sale of second-hand goods?

GST on second-hand goods depends on who is selling: (1) Registered dealer: GST applies on the profit margin (selling price minus purchase price) under Rule 32(5) margin scheme — NOT on the full selling price. (2) Individual selling personal used goods: No GST if the person is not registered under GST (since income from occasional used goods sales does not make one liable for GST registration). (3) Unregistered business: If second-hand goods sales are part of business and turnover exceeds ₹40L (₹20L for services), GST registration and tax apply.

What is Rule 32(5) margin scheme for second-hand goods?

Rule 32(5) of CGST Rules allows registered dealers in second-hand goods to pay GST only on the profit margin (the difference between selling price and purchase price), instead of the full transaction value. Formula: GST = (Selling Price − Purchase Price) × applicable GST rate. If the purchase price ≥ selling price (no profit), GST = nil. This margin scheme is available only when the dealer purchased the used goods from an unregistered person (individual/consumer). If bought from another registered dealer with GST invoice, normal ITC mechanism applies.

What is the GST rate on used cars under Notification 8/2018?

Under Notification No. 8/2018-CT(Rate), registered dealers selling old/used motor vehicles pay reduced GST only on the margin (selling price minus depreciated/purchase price). GST rates on used vehicles under margin scheme: Small petrol/diesel/CNG cars (engine ≤ 1200cc, length ≤ 4000mm): 12% on margin. Larger cars, SUVs (engine > 1200cc or length > 4000mm, or diesel > 1500cc): 18% on margin. If margin is negative (loss on sale), GST = nil. This applies to dealers specifically in the business of buying and selling used vehicles.

Can an individual sell their old car or goods without paying GST?

Yes. An individual selling personal used goods (car, furniture, electronics, jewellery) is NOT required to pay GST if they are not registered under GST. Personal asset sales do not constitute "supply in the course or furtherance of business" for a non-registered individual. However, if the buyer is a GST-registered dealer purchasing for resale, the dealer must apply reverse charge or use the margin scheme on their subsequent sale. The individual seller has no GST obligation in this scenario.

Can a GST-registered dealer claim Input Tax Credit on purchase of second-hand goods from unregistered persons?

No. When a registered dealer purchases second-hand goods from an unregistered person (individual seller), no GST is charged on that purchase — so there is no Input Tax Credit (ITC) available on the purchase. The margin scheme under Rule 32(5) is specifically designed for this situation — the dealer pays GST only on the profit margin to account for the lack of ITC. If a dealer purchases from another registered dealer (with GST invoice and ITC), the margin scheme cannot be used — normal GST on full value applies with ITC offset.

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