GST Rate Reduction from 28% to 18%: Used Motor Vehicles and Biofuel Buses
At its meeting on 18 January 2018, the GST Council recommended reducing GST from 28% to 18% for specified old and used motor vehicles and buses operated exclusively on biofuels for public transport.
Goods covered by the January 2018 recommendation
The following two entries are reproduced from the original list, including the historical conditions attached to the used-vehicle category.
| S. No. | HSN chapter / heading | Goods and historical conditions |
|---|---|---|
| 1 | 87 | Old and used motor vehicles [medium and large cars and SUVs] on the margin of the supplier, subject to the condition that no input tax credit of central excise duty/value added tax or GST paid on such vehicles has been availed by him. |
| 2 | 8702 | Buses, for use in public transport, which exclusively run on bio-fuels. |
Legal basis and key definitions
Article 279A of the Constitution: GST Council
Article 279A establishes the GST Council and provides for recommendations on GST matters, including rates and exemptions. A Council decision must be distinguished from the legal instrument that gives it effect.
Section 9(1) of the CGST Act, 2017
Section 9(1) provides for the levy and collection of central GST on intra-State supplies, at rates notified by the Government on the Council's recommendations, subject to the statutory ceiling. The corresponding State GST applies under State legislation. For inter-State supplies, section 5(1) of the IGST Act, 2017 provides the charging framework.
Section 15 of the CGST Act: value of taxable supply
Section 15 lays down the general valuation rules. For specified second-hand goods, a special margin-based valuation mechanism can apply where the conditions in the relevant notification are met. The margin mechanism is not an automatic deduction available for every sale of a used vehicle.
Input tax credit and the used-vehicle margin scheme
The 2018 used-vehicle concession was linked to conditions including non-availment of input tax credit of central excise duty, VAT or GST paid on the vehicle. Notification No. 8/2018-Central Tax (Rate), dated 25 January 2018, is a key historical instrument for the used-vehicle rate concession, read with applicable amendments and the corresponding State/IGST notifications. Eligibility and the taxable margin must be checked against the actual notification text.
HSN classification
HSN means Harmonised System of Nomenclature. Chapter 87 covers vehicles other than railway or tramway rolling stock and their parts and accessories; heading 8702 generally covers motor vehicles for the transport of ten or more persons, including the driver. The classification and any special-rate conditions are essential when determining the correct GST treatment.
How to read the two historical entries
- Medium and large used cars and SUVs: the 2018 proposal concerned tax on the supplier's margin, not necessarily the full resale price, subject to the specified credit-related conditions.
- Biofuel buses: the second entry concerned buses for public transport that exclusively run on biofuels. The words public transport and exclusively are material to the historical description.
- Current transactions: later amendments may alter rates, coverage, valuation and eligibility. Do not apply the January 2018 percentages without checking the currently effective instruments.
Official legislation and rate resources
- GST Council - meetings, decisions and recommendations
- CBIC Tax Information Portal - GST notifications and amendments
- CBIC GST - official guidance and statutory materials
- India Code - CGST Act, IGST Act and constitutional provisions
- GST Common Portal
When checking a rate, verify the Central Tax (Rate) and Integrated Tax (Rate) notifications, corresponding State tax instruments where relevant, and all subsequent amendments effective on the supply date.
Frequently asked questions
Did the GST Council recommendation itself change the tax rate?
No. GST Council recommendations guide rate changes, but applicable rates depend on notifications issued under the relevant GST legislation and their effective dates.
How is GST calculated on eligible used vehicles?
The January 2018 scheme provided a margin-based valuation for eligible used vehicles subject to conditions, including restrictions on input tax credit. The applicable notification and subsequent amendments must be checked for a particular transaction.
Does the historical 18% rate necessarily apply today?
No. The list records a January 2018 recommendation. Classification, transaction date and current notifications must be verified independently.