GST & Indirect Tax

GST Margin Scheme for Second-hand Goods Dealers: Complete Guide for 2026

📅 June 2026GST✔ cbic-gst.gov.in

Reviewed by CA Nikhil Gupta · Last reviewed 3 July 2026

Second-hand goods dealers in used cars, refurbished electronics, antiques or pre-owned jewellery can pay GST only on the margin under the GST Margin Scheme..s guide explains eligibility, calculation and documentation.

Use the GST Composition Scheme Eligibility Checker to apply these points to your figures or facts.

What Is the Margin Scheme?

The GST Margin Scheme under Notification 8/2018-CT(Rate) and Rule 32(5) allows eligible dealers to pay GST on the margin (selling price minus purchase price) rather than the full value. This prevents double taxation when goods already bore GST at the first supply stage.

For the connected rule, example or next step, see GST on Solar Projects: Goods vs Works Contract.

Goods Category	Margin Scheme?	GST Rate on Margin
Used motor vehicles (no ITC ever claimed on the vehicle)	Yes	18% on margin (unified rate from 16 Jan 2025; see below)
Second-hand jewellery (no ITC claimed)	Yes	3% on margin
Refurbished electronics (no ITC claimed)	Yes	Applicable rate on margin
Goods purchased with a tax invoice where ITC WAS claimed	No	Full value

Key Eligibility Condition

⚠️

The Test Is "No ITC Claimed," Not "Unregistered Supplier": Rule 32(5) of the CGST Rules and Notification 8/2018-CT(Rate) make eligibility turn on whether the dealer availed input tax credit on the purchase — not on whether the supplier was registered. A dealer can still use the margin scheme on goods bought from a registered supplier, provided no ITC was claimed on that purchase (for example, where ITC was never available because the original purchase was a blocked credit, or where the dealer simply chose not to claim it and can substantiate that). Conversely, claiming ITC on the purchase disqualifies the margin scheme regardless of the supplier's registration status. Purchases from unregistered persons are also separately relieved from reverse charge under the margin-scheme notification, which is likely the source of the common "must be unregistered" misconception.

Calculation and Case Study

Case Study: Used Car Dealer — 3 Vehicles (Post-16 Jan 2025 Unified Rate)

All purchased with no ITC claimed on the purchase

Vehicle A: SP Rs.8L, PP Rs.6.5L

Margin Rs.1.5L × 18% = Rs.27,000 GST

Vehicle B: SP Rs.22L, PP Rs.20L

Margin Rs.2L × 18% = Rs.36,000 GST

Vehicle C: SP Rs.5L, PP Rs.5.5L

Negative margin → Rs.0 GST

Total GST

Rs.63,000 (positive margins only; no netting)

Notification 04/2025-CTR (effective 16 January 2025) unified the previously split 12%/18% rate structure for old and used vehicles under the margin scheme into a single 18% rate on the margin, regardless of engine size or vehicle category. Always verify the current rate before invoicing, since rates in this category have changed more than once in recent years.

For the connected rule, example or next step, see GST Composition Scheme for Service Providers: 6% up to ₹50 Lakh.

ITC Under Margin Scheme

When the margin scheme is used, no ITC is available on the purchase of the second-hand goods (no tax invoice from unregistered seller). ITC on overheads (rent, repairs, electricity) is claimable as usual.

✓ Key Points

Each vehicle assessed individually — negative margins cannot offset positive margins from other vehicles
Invoice should show selling price inclusive of GST; tax amount need not be separately disclosed
Registration threshold: Rs.20L of aggregate turnover (full selling price, not just margins)

FAQ

For the connected rule, example or next step, see Schedule I Serial 1 - GST Goods Rate Entry.

Can a dealer use both margin scheme and regular scheme? +

Yes, but not for the same vehicle. The deciding factor for each individual vehicle is whether ITC was claimed on its purchase — not who the supplier was. Margin scheme applies to vehicles where no ITC was claimed (whether bought from a registered or unregistered seller); regular full-value taxation applies where ITC was claimed on acquisition. Track each vehicle's ITC status separately and maintain documentation to substantiate the no-ITC position.

Does GST on margin need to be shown on the invoice? +

For margin scheme invoices, the GST amount need not be separately shown. The invoice shows the selling price inclusive of GST. The dealer maintains internal records of purchase price and margin for GSTR filing.

What is the threshold for margin scheme registration? +

No separate threshold. The Rs.20L registration threshold applies to overall turnover (full selling price). Once registered, margin scheme GST applies to every eligible transaction.

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Source and review trail

Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.

Primary category: GST & Indirect Tax
Official starting point: www.gst.gov.in

Page source links

Primary sources & related provisions

Statutory provisions referenced in this guide:

Rule 32 - CGST Rules, 2017