18% GST on the sale of an old EV?

After the last GST council meeting on 21st December 2024, there’s a change in the GST rate for the sale of old EVs (electric vehicles) from 12% to 18% for businesses.

Followed by the press release, during the press conference by FM Nirmala Sitharaman, she gave an example of how this will be practised which to our best guess got miscommunicated. Here’s the video of her explaining this.

This created confusion amongst people on Twitter and otherwise, that the person has to pay GST even if the seller of the old EV bore a loss in the transaction which is very obvious because the vehicle is a depreciating asset.

Example: I bought a car for ₹ 10 Lakh and sold this at ₹ 8 Lakh, then on the loss of ₹ 2 Lakh I’ll have to pay GST 18%.

After studying the press release shared by the Finance Ministry, it’s clearly stated that Registered Businesses who deals in the sale/purchase of old goods would fall into this category and this doesn’t impact individuals.

Link for this: https://pib.gov.in/PressReleasePage.aspx?PRID=2086873

So for example, I operate a business selling old cars named OldEVTrade.com and I bought a vehicle for ₹ 8 Lakhs and sold that ₹ 10 Lakhs. I’ll pay GST on ₹ 2 Lakhs of gain here. So my GST would be ₹ 36,000 here. The final amount for new car owner would be ₹ 10,36,000.

Following this, a person asked me on Twitter about this case since the GST amount is separately visible on Invoices generated, then customers will know how much margin I’m making on this based on GST calculations.

The answer to this is there’s a concept called Margin Scheme in GST. Which is designed especially for businesses that deal in the sale/purchase of old goods. In this scheme, businesses don’t have to mention the GST amount separately in the Invoice and only the final amount to be shared with the customers. Margin Schemes in GST have a different Invoice format.

Details about Margin Scheme in GST are here: https://gstcouncil.gov.in/sites/default/files/e-version-gst-flyers/margin-scheme-under-gst.pdf

This is what I found while reading about this and please do your independent study in case you want to understand this in detail.

Also Note: I’m not a tax consultant or CA or any professional. I did this research reading just for fun

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Ankit Aman