GST on Old and Used Motor Vehicles: Reduction from 28% to 12% in January 2018
At its meeting on 18 January 2018, the GST Council recommended reducing the GST rate from 28% to 12% for specified categories of old and used motor vehicles, subject to the margin scheme and restrictions on input tax credit.
Goods recommended for reduction from 28% to 12%
The following is the original goods category covered in the 18 January 2018 article. The description is retained as a historical record, with spelling and punctuation clarified.
| S. No. | Chapter / HSN | Goods and conditions (2018 recommendation) |
|---|---|---|
| 1 | 87 | All types of old and used motor vehicles other than medium and large cars and SUVs, taxable on the supplier's margin, subject to the condition that no input tax credit of central excise duty, value added tax (VAT) or GST paid on those vehicles had been availed by the supplier. |
Chapter 87 of the Customs Tariff covers vehicles other than railway or tramway rolling-stock, and parts and accessories thereof. The specific GST entry and its conditions, rather than the chapter number alone, determine the rate.
Legal basis: Council recommendations and GST notifications
Article 279A of the Constitution of India
Article 279A establishes the GST Council and empowers it to make recommendations on GST matters, including rates. A Council recommendation is not by itself a rate notification; it must be implemented through the relevant statutory instruments.
Section 9(1), Central Goods and Services Tax Act, 2017
Section 9(1) provides for the levy and collection of central GST on intra-State supplies of goods or services at rates notified by the Central Government on the recommendations of the GST Council, subject to the statutory framework.
Section 5(1), Integrated Goods and Services Tax Act, 2017
Section 5(1) governs the levy of integrated GST on inter-State supplies, with rates notified under that Act. State GST legislation also applies to the State component of eligible intra-State supplies.
Notification No. 8/2018-Central Tax (Rate), dated 25 January 2018
This notification provided concessional central-tax treatment for specified old and used motor vehicles, subject to conditions, and is a key historical instrument for understanding the January 2018 changes. Its corresponding State/UT tax and IGST instruments and all later amendments must also be consulted. The historical category above should not be applied without checking the exact notified entry.
Section 15, CGST Act: Value of taxable supply
Section 15 sets out the general rules for valuation of taxable supplies. A specific notification may provide a special basis for calculating the taxable amount, such as the margin for eligible used-vehicle transactions. The conditions of that notification control eligibility.
How the used-vehicle margin scheme operates
Under the historical notification's specified conditions, the taxable value for eligible old and used vehicles is based on the margin rather than the entire sale consideration. In broad terms, the margin is the selling price less the purchase price, or, where depreciation under section 32 of the Income-tax Act has been claimed, the selling price less the depreciated value determined under the applicable notification. A negative margin is ignored.
Eligibility is conditional. In particular, the historical concession required that the supplier had not availed input tax credit of central excise duty, VAT or GST on the vehicle. Special cases, including supplies by registered dealers, vehicle classifications and later legislative changes, should be checked separately.
Illustration (historical method only): If an eligible vehicle was purchased for Rs. 4,00,000 and sold for Rs. 4,50,000, the illustrative margin would be Rs. 50,000. The applicable tax rate must be determined from the notification in force on the transaction date, not from this example.
Verify the GST rate currently applicable
For any sale or purchase in 2026, check the applicable consolidated rate schedule, notifications and amendments, including changes introduced after 2018. Classification, vehicle specifications, eligibility for margin valuation and availability of input tax credit can materially change the result.
- GST Council — meeting recommendations and announcements.
- CBIC GST — GST laws, rate notifications and circulars.
- CBIC Tax Information Portal — search for Notification No. 8/2018-Central Tax (Rate) and amendments.
- India Code — the CGST Act, IGST Act and other legislation.
- GST Portal — taxpayer services and GST resources.
When determining the rate, consult the legal text applicable on the date of supply, rather than relying on a historical Council press release alone.
Frequently asked questions
Did every used car qualify for the 12% rate in January 2018?
No. The historical 12% treatment was conditional and excluded specified medium and large cars and SUVs. The applicable notification and vehicle classification determine the treatment.
Is GST calculated on the full sale price under the used-vehicle margin scheme?
For eligible supplies under the relevant notification, GST is computed on the prescribed margin, subject to its conditions; a negative margin is ignored.
Does the 2018 recommendation establish the current GST rate?
No. Council recommendations and historical notifications must be distinguished from current amended rate notifications. Verify the applicable law on the supply date.
This article provides general information about a historical GST rate change and is not a substitute for reviewing the current law and transaction-specific facts.