A registered dealer in used goods pays GST only on the margin — the sale price minus the purchase price — under the Rule 32(5) margin scheme, not on the full value. Most second-hand goods (and now all used cars) are taxed at 18% on that margin. If the margin is zero or negative, no GST is payable. An individual selling a personal used item is not liable for GST at all.
GST on Second-Hand Goods — Decision Table
The GST position for every common used-goods scenario, with the taxable value and whether Input Tax Credit is available.
| Scenario | GST? | Rate | Taxable value | ITC |
|---|---|---|---|---|
| Individual sells own used item | No | Nil | — | — |
| Dealer sells used goods (bought from individual) | Yes | 18% | Margin only | No |
| Dealer sells used car (any category) | Yes | 18% | Margin only | No |
| Dealer resale with no profit / at a loss | No | Nil | Negative margin | — |
| Dealer bought from a registered dealer (GST invoice) | Yes | 18% | Full value | Yes |
| Unregistered business below threshold | No | Nil | — | — |
Margin-scheme rate reflects the used-car unification to 18% (eff 16 Jan 2025) retained under GST 2.0 (22 Sep 2025). Confirm the item rate on the official GST portal before invoicing.
Rule 32(5) Margin Scheme — How the Tax Is Computed
Rule 32(5) of the CGST Rules lets a dealer in second-hand goods value the supply at the margin — sale price minus purchase price — instead of the full transaction value. It applies when the goods were bought from an unregistered person (an individual or consumer), where no GST was charged and so no ITC is available on the purchase.
- 1Individual sellerSells used item · no GST charged
- 2Dealer buysNo ITC on the purchase
- 3Dealer resellsGST only on sale − purchase margin
- 4GST paid18% on the margin, not full value
How the Margin Saves Tax — ₹65,000 Resale
18% Margin scheme (Rule 32(5))
18% Without the scheme
Under Rule 32(5) the dealer cannot claim ITC on the used goods purchased from an unregistered person, and cannot pass ITC on to the buyer (the invoice shows no GST breakup). If the dealer instead buys from a registered dealer with a tax invoice, the margin scheme cannot be used — normal GST on full value applies, with ITC.
Run a used-goods trade? Get your margin-scheme invoicing and returns set up correctly.
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GST on Used & Old Cars
From 16 January 2025 (55th GST Council), the earlier 12%/18% split on used vehicles was scrapped and replaced by a single 18% rate on the margin for all categories — including small cars, SUVs, two-wheelers and electric vehicles. GST 2.0 (22 September 2025) kept this at 18%.
| Vehicle | GST rate | Taxable value | Notes |
|---|---|---|---|
| Small petrol / diesel car | 18% | Margin only | Earlier 12% — now unified to 18% |
| Larger cars & SUVs | 18% | Margin only | Rate unchanged |
| Used electric vehicle (EV) | 18% | Margin only | Earlier 12% — now 18% |
| Two-wheeler / three-wheeler | 18% | Margin only | Now covered by the flat rate |
| Individual selling own car | Nil | — | No GST for unregistered persons |
18% applies only to a GST-registered dealer, on the margin, where no ITC was claimed on the vehicle. Private individual-to-individual sales stay outside GST.
Where a business claimed income-tax depreciation on the vehicle, the "margin" is the sale price minus the depreciated (written-down) value; if that is negative, no GST is payable. This lets a company disposing of a used business car compute GST on a realistic margin rather than the full sale price.
Buying or selling used cars as a business? Get your margin computation reviewed.
Get Used-Car GST Advice →Who Actually Pays GST on Second-Hand Goods
✓GST applies when
- You are a GST-registered dealer in used goods
- You resell at a profit (positive margin)
- You buy from a registered dealer with a GST invoice
- Your used-goods business crosses the registration threshold
!No GST when
- An individual sells a personal used item
- The resale is at no profit or a loss
- The seller is unregistered and below the threshold
- It is a one-off private sale, not a business
Registration Threshold for Used-Goods Dealers
A person dealing in used goods must obtain GST registration once aggregate turnover crosses the threshold:
- ₹40 lakh/year — for a supplier of goods (most states)
- ₹20 lakh/year — for suppliers of services, and in special-category states
- An individual selling personal used assets occasionally is not carrying on business and need not register at all.
- GST registration (if above threshold)
- Rule 32(5) margin computation per item
- Purchase record from the unregistered seller
- No ITC claimed on margin-scheme stock
- Correct 18% rate on the margin
- Tax invoice without GST breakup (margin scheme)
- GSTR-1 (outward supplies)
- GSTR-3B (monthly / quarterly)
- Books & stock records upkeep
- Rates & notifications: gst.gov.in
- CBIC rate finder: cbic-gst.gov.in
- Margin scheme: Rule 32(5), CGST Rules 2017
- Used vehicles unified to 18%: 55th GST Council (eff 16 Jan 2025), Notification 4/2025-CT(R)
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position with the official source before you act on it.