Car Bills & Invoices

HSN Code for Used Cars on a GST Invoice

By Bill My Car · Updated 6 August 2026 · 5 min read

The HSN code for a used car is 8703, the heading for motor cars and other motor vehicles principally designed for the transport of persons. It is the same heading a new car sits in. Being second-hand changes the rate and the value you charge GST on, not the classification.

If your invoice software leaves the field blank or prints a placeholder like 000, that is a defect worth fixing before your next return.

What 8703 covers

Dealers who handle only cars can treat 8703 as the default. Dealers who also move bikes or commercial vehicles cannot, and printing 8703 across the board is a classification error waiting to be picked up. See automobile bill of sale for how document sets differ across vehicle types.

Why the code sits on the invoice at all

HSN is one of the mandatory particulars of a tax invoice under Rule 46 of the CGST Rules, 2017, which sets out what a tax invoice must contain: the description of goods, the HSN code, the quantity, the rate and the taxable value.

The practical function is matching. HSN is what lets the department reconcile what you sold against the rate you charged. A used car invoiced at 18 percent under HSN 8703 tells a coherent story. The same invoice with no HSN does not.

How many digits

A valid HSN is four, six or eight digits. 8703 is the four-digit heading, and it is a complete, valid HSN in its own right.

Whether you must print four, six or eight depends on your aggregate turnover, and the thresholds have been revised more than once since GST began. Rather than reproduce a number that may have moved, confirm the current requirement for your turnover band with your CA or on the GST portal. What does not change is that the code must be present and must be the right heading.

HSN and the margin scheme

Used vehicle dealers commonly sell under the margin scheme in Rule 32(5) of the CGST Rules, 2017. Where no input tax credit was availed on the purchase, the value of supply is the selling price minus the purchase price. A negative margin is ignored, so no GST is payable when a car sells at or below cost.

The rate side comes from Notification 8/2018-Central Tax (Rate) dated 25 January 2018, which set concessional rates on old and used motor vehicles applied to the margin. Following the 55th GST Council meeting, that notification was amended to a uniform 18 percent on old and used motor vehicles including electric vehicles, replacing the earlier split where smaller vehicles attracted 12 percent. Notification 1/2018-Compensation Cess (Rate) provides NIL compensation cess on used vehicles availing Notification 8/2018.

None of this touches the HSN. The margin scheme changes what you tax. The notification changes at what rate. The heading stays 8703.

Full detail on the calculation is in the GST margin scheme for used cars and GST on used cars in India.

What a correct line item looks like

On a used vehicle tax invoice the line should carry:

• Description: Used Motor Vehicle, with the registration number
• HSN: 8703
• Quantity: 1 Vehicle
• Taxable value: the margin, where the margin scheme applies
• Rate and tax: CGST and SGST for an intra-state supply, IGST for inter-state

Place of supply drives the CGST-SGST versus IGST split. For goods it is the location where movement terminates for delivery to the buyer, under Section 10 of the IGST Act. A Maharashtra dealer delivering to a Karnataka buyer is making an inter-state supply, and the invoice should show IGST.

When HSN does not belong on the document

Not every piece of paper a dealer hands over is a tax invoice, and HSN belongs only on the ones that are.

A dealer who is not registered under GST should not be issuing a document that looks like a tax invoice. Printing an HSN and a tax breakup on a bill when you have no GSTIN is worse than leaving them off: it represents a tax collection you are not entitled to make.

The same applies to a registered dealer issuing a non-GST bill for a transaction outside the scheme. Keep the two document types visually distinct so nobody, including your own staff, confuses them at the counter.

If you have been using the wrong code

Two situations, with different answers.

Blank or placeholder HSN on past invoices. Fix the setting so future invoices are correct. Whether anything needs doing about invoices already filed depends on your returns position, and that is a question for your CA rather than a settings change.

A genuinely wrong classification, such as 8703 printed on two-wheeler sales. This is more serious, because the code and the rate are supposed to corroborate each other, and a mismatch across a run of invoices is the kind of pattern that surfaces in scrutiny. Stop the error at source, then take advice on the invoices already issued.

In both cases the first move is the same: correct the stored default, so you are not adding to the pile while you work out what to do about the existing one.

Common mistakes

• Blank or placeholder HSN. A field showing 000 fails validation and looks careless in a scrutiny.
• Charging 18 percent on the full sale price when the margin scheme applies. That is a rate applied to the wrong value, and it overcharges the buyer.
• Using 8703 for a two-wheeler because it is the code already saved in the software.
• Missing GSTIN or PAN alongside the HSN. Rule 46 wants the full particulars set, not a subset.
• Non-GST bills carrying an HSN. If you are not issuing a tax invoice, do not dress the document up as one. See used car invoice format: GST vs non-GST.

Getting it right every time

The reliable fix is to set the HSN once at the dealer profile level and have every invoice inherit it, rather than typing it per sale.

Bill My Car stores the HSN on the dealer profile, defaults to 8703 when it is missing or malformed, calculates GST on the margin under Rule 32(5) rather than the full vehicle value, and determines the CGST-SGST or IGST split from the place of supply. Sign in and generate a compliant invoice.

GST rates, notifications and turnover thresholds change. The rule and notification references above are current as of 2026. Confirm the position for your turnover and your transactions with your CA.