GST · Two-wheelers
GST on second-hand bikes, explained for dealers.
The margin scheme isn't just for cars. If you deal in used motorcycles, scooters or electric two-wheelers as a GST-registered business, you pay GST on your margin— not the sale price. Here's exactly how it works after the January 2025 rate change.
General information for dealers, not tax advice. Confirm specifics with your chartered accountant.
The rule in one paragraph
Under Rule 32(5) of the CGST Rules, a registered dealer in second-hand goods who sells a vehicle as-is (or after minor refurbishment) and who did not claim input tax crediton its purchase, pays GST on the difference between selling and purchase price. Since the GST Council's 55th meeting (effective January 2025), the rate is a unified 18% on margin for all used vehicles— two-wheelers included, petrol or electric. Before that, two-wheelers attracted 12%; budget accordingly if you're comparing old invoices.
A worked example
You buy a 2022 Activa from an individual for ₹62,000 and sell it for ₹75,000.
- Margin = ₹75,000 − ₹62,000 = ₹13,000
- GST (margin treated as tax-inclusive) = 13,000 × 18⁄118 ≈ ₹1,983
- Split ₹991.5 CGST + ₹991.5 SGST on an intra-state sale.
Sell that same Activa for ₹58,000 — a ₹4,000 loss — and the margin is negative: no GST is due on that sale.
Why bike dealers get this wrong more than car dealers
- Volume: a two-wheeler floor does in a week the sales a car yard does in a month — manual margin math per sale doesn't survive that pace.
- Thin margins: on a ₹10,000 margin, calculating 18% on the full ₹70,000 sale price instead of the margin is the difference between profit and loss.
- Cash habits: instalment sales and part-payments mean the final sale price isn't always written anywhere — which makes the margin unprovable in an audit.
What the invoice must show
Registration number, the two-wheeler's HSN code, your GSTIN, buyer details, the taxable margin value and the CGST/SGST (or IGST) break-up. Financiers and RTOs ask for exactly this format. MotorIQ knows each vehicle's purchase price, computes the margin-scheme tax and prints the compliant invoice in one tap — see MotorIQ for two-wheeler dealers →
Related reading
The mechanics are identical for cars — with bigger numbers. The full margin scheme guide covers conditions, depreciation cases and the legal references in detail.
Common questions
Do I pay GST on the full sale price of a used bike?
No — registered dealers who didn't claim input tax credit on the purchase pay GST only on the margin: sale price minus purchase price. This is the margin scheme under Rule 32(5) of the CGST Rules.
What rate applies to used two-wheelers?
18% on the margin. Until January 2025, vehicles other than large cars and SUVs attracted 12% on margin; following the GST Council's 55th meeting, the rate was unified at 18% for all used vehicles, including two-wheelers and EVs.
I bought the bike from an individual, not a dealer. Any GST on the purchase?
No — purchases of second-hand goods from unregistered persons are exempted from reverse-charge GST for margin scheme dealers (Notification 10/2017-CT (Rate)).
What if I sell a bike for less than I paid?
Negative margin means the value of supply is nil — no GST is payable on that sale. You can't offset it against other sales, though; each supply stands alone.
Does this apply to electric scooters too?
Yes — since the January 2025 amendment, used EVs fall under the same unified 18%-on-margin treatment for registered dealers.
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