GST on Old Vehicle
This query is : Resolved
Quick Summary
03 January 2026
A scrap dealer purchase used vehicles.
He purchased an old vehicle from a person where GST was paid under Reverse Charge Mechanism (RCM) on Full Purchase Value
Now the dealer intends to sell the same old vehicle.
Kindly clarify the following:
Whether GST is required to be charged on margin basis as per Rule 32(5) of CGST Rules, or
Whether GST is required to be charged on the full sale value of the vehicle?
He purchased an old vehicle from a person where GST was paid under Reverse Charge Mechanism (RCM) on Full Purchase Value
Now the dealer intends to sell the same old vehicle.
Kindly clarify the following:
Whether GST is required to be charged on margin basis as per Rule 32(5) of CGST Rules, or
Whether GST is required to be charged on the full sale value of the vehicle?
04 January 2026
Under current GST laws as of 2026, the scrap dealer must charge GST on the full sale value of the vehicle rather than using the margin scheme under Rule 32(5).
ITC Restriction: Rule 32(5) of the CGST Rules (the Margin Scheme) specifically requires that the dealer must not have availed Input Tax Credit (ITC) on the purchase of the second-hand goods.
Impact of RCM: Since the dealer paid GST under the Reverse Charge Mechanism (RCM) on the full purchase value, they are eligible to claim that tax as ITC.
Forfeiting the Margin Scheme: If a dealer chooses to claim ITC on a vehicle, they cannot use the Margin Scheme for its resale. Consequently, they must pay GST on the entire selling price.
ITC Restriction: Rule 32(5) of the CGST Rules (the Margin Scheme) specifically requires that the dealer must not have availed Input Tax Credit (ITC) on the purchase of the second-hand goods.
Impact of RCM: Since the dealer paid GST under the Reverse Charge Mechanism (RCM) on the full purchase value, they are eligible to claim that tax as ITC.
Forfeiting the Margin Scheme: If a dealer chooses to claim ITC on a vehicle, they cannot use the Margin Scheme for its resale. Consequently, they must pay GST on the entire selling price.
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04 January 2026
Thanks a lot Sir for Reply
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05 January 2026
You are welcome.
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