Shubham: I had a Hyundai Creta under a 48-month novated lease/lease-to-own arrangement with a leasing company. At the end of the lease, they have offered me the option to purchase the vehicle as the end user. They have issued a revised proforma buyback invoice charging CGST 20% and SGST 20%. So effectively 40% total GST on the buyback value of a used vehicle.
Their explanation is that due to post-2025 GST changes, the current GST rate for this category of car is 40%, and since leasing is treated as a supply of service, they are applying that logic. My issue is that this is not a lease rental invoice, it is a buyback / resale invoice for a used car.
My questions:
- For end-of-term buyback of a used leased car, is GST charged as sale of a used vehicle?
- Should GST be 40% total, or 18% total?
- Should GST be on the full sale value or only on margin?
- Does the novated lease structure change the GST treatment of the final buyback sale?
- What notification / circular / provision should be checked?
Replied Vishal: The final buyback should be treated as sale of an old/used vehicle, not lease rental. If the leasing company has not availed ITC on the car, GST is generally 18% on margin/depreciated margin, not on full value. If ITC was availed or margin benefit is not available, 40% may apply depending on vehicle classification.
Please ask them for written working under Notification No. 8/2018-CTR, as amended by Notification No. 04/2025-CTR and 12/2025-CTR, and Rule 32(5) margin calculation. The novated lease structure alone does not change the GST treatment of the final sale.
Please find below responses for your qureies:
1. Yes, it is.
2. Rate of GST will be 40%
3. Full Sales Value
4. No. Practically, it often disqualifies margin scheme.
5. Rule 32(5), CGST Rules and Notification 8/2018 – CT(R)
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