Bill My CarInvoicing, GST & Billing
18% GST on Used Cars: What the New Rate Means (2026)
The GST on used cars was simplified to a unified 18% rate, replacing the earlier mix of rates that ranged from 5% to 28% by vehicle type. For dealers, the headline number sounds big, but the way it is applied keeps the actual tax small. Here is what the new rate means.
This builds on our full GST on used cars and margin scheme guides. Tax rules change, so confirm your specific case with a professional.
The key point: 18% on margin, not on the car
For a registered dealer using the margin scheme, the 18% GST applies to the margin, not the full sale value:
Margin = Selling price minus Purchase price
If you buy a car for Rs 5,00,000 and sell it for Rs 5,20,000, GST is 18% of the Rs 20,000 margin, which is Rs 3,600 (split as CGST 9% and SGST 9%). Sell at a loss and the margin is nil, so there is no GST.
Worked example
| Item | Amount |
|---|---|
| Purchase price | Rs 5,00,000 |
| Selling price | Rs 5,20,000 |
| Margin (taxable value) | Rs 20,000 |
| GST @ 18% (9% + 9%) | Rs 3,600 |
| Buyer pays | Rs 5,23,600 |
What changed
- A single 18% rate now covers used cars, including EVs, instead of varied slabs.
- The compensation cess that previously stacked on some vehicles was removed, which simplifies the calculation.
- The margin scheme still protects dealers from paying tax on the full resale value.
Who pays and who does not
- Registered dealer: 18% on the margin (margin scheme).
- Private seller: no GST.
- Unregistered dealer (below threshold): no GST charged.
What this means for your invoice
A margin-scheme invoice shows GST on the margin only and does not pass on input tax credit. See the exact layout in the car invoice format and used car invoice format.
Bill it correctly, every time
Working out the margin and the 18% by hand on each deal is slow and error-prone. Enter the purchase price, sale price and vehicle once in Bill My Car, and it computes the margin and the CGST and SGST for you, then carries the same data into your sale letter and RTO forms.
Bill the right GST automatically
Bill My Car turns one invoice into GST & non-GST bills, sale letters, Form 29, Form 30 and delivery notes, auto-filled and ready to download. Built for Indian used-car dealers.
Try Bill My Car free →Frequently asked questions
What is the GST rate on used cars now?
A unified 18% GST applies to the sale of used cars by registered dealers, replacing the older spread of 5% to 28%. For most dealers it applies only to the margin, not the full vehicle value.
Is 18% GST charged on the full price of a used car?
No. Under the margin scheme, the 18% applies only to the dealer's margin (sale price minus purchase price). If the car is sold at a loss, no GST is payable.
Does a private seller pay 18% GST?
No. A private individual selling their own car is not making a business supply and charges no GST. The 18% applies to registered dealers in the business of selling vehicles.