GST on Sale of an Old Car by a Business
GSTZone Desk · Updated 2026
Short answer
If your business never claimed ITC on the car (the usual case, since car ITC is normally blocked), selling it later attracts GST only on the MARGIN — sale price minus depreciated value — not on the full sale price. If ITC WAS claimed, the full sale value is taxed normally.
In detail
This margin-scheme treatment for used vehicles exists precisely because most businesses never got any ITC benefit when they originally bought the car — Section 17(5) blocks that credit for ordinary passenger vehicles, as covered earlier in this series. Taxing the full resale value on top of that would effectively tax the same value twice.
Under the notified margin scheme, the taxable value is the difference between the sale price and the value determined under Income Tax depreciation rules (or, if depreciation wasn’t claimed, the difference between sale price and original purchase price) — and GST applies only to that margin, not the full transaction value. If the margin is negative (sold for less than the depreciated value), no GST arises on the sale at all.
This changes completely if the vehicle was one of the exceptions where ITC WAS actually claimed at purchase (say, it was bought for a cab-rental business). In that case, the margin scheme doesn’t apply — the full sale value is taxed at the normal applicable rate, since the credit chain was already engaged from the start.
GSTZone tip
Before pricing the sale of an old company vehicle, first confirm — from your own original purchase records — whether ITC was actually claimed on it. That single fact decides whether you’re taxing the full value or just the margin, and it’s an easy detail to lose track of years later.
Related questions
What GST rate applies to the margin on a used car sale?+
Rates vary by vehicle category under the margin scheme notification — commonly 18% for most cars, with a lower 12% for certain smaller-engine-capacity vehicles specifically notified for the concessional rate.
Does the margin scheme apply to individuals selling their personal car, not a business?+
No — an individual selling their own personal car isn’t in the business of supplying goods at all, so it’s outside GST altogether, margin scheme or otherwise.
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