The GST Council, led by Finance Minister Nirmala Sitharaman, has approved a significant increase in the tax rate for the sale of used cars, including electric vehicles (EVs). The GST, previously set at 12%, will now rise to 18%, a move aimed at bringing uniformity to the taxation of second-hand vehicles.
Under the existing structure, vehicles with specific engine sizes and dimensions already attract an 18% GST. These include petrol, LPG, and CNG vehicles with engines of 1200cc or more and lengths exceeding 4000mm, diesel vehicles with engines over 1500cc, and SUVs with similar specifications. The new ruling extends this uniform 18% tax rate to all used vehicles sold by businesses, eliminating discrepancies in the taxation framework.
This adjustment affects vehicles across various categories, including those that were previously taxed at 12%, such as used electric vehicles. While new EVs enjoy a lower 5% GST to promote adoption, the increase to 18% for resold EVs may reduce their appeal in the second-hand market.
Increased GST on used cars: Does it affect you?
Under the revised rate, the GST will only apply to the margin earned by the supplier, calculated as the difference between the purchase price and the selling price (adjusted for depreciation if applicable). Transactions involving the sale and purchase of used vehicles between individuals will remain exempt from GST.
Private transactions involving the sale and purchase of used vehicles by individuals remain unaffected by this change. Such transactions will continue to be exempt from GST, ensuring that private car owners are not impacted by the hike. The GST Council emphasized that this hike applies only to vehicles resold by businesses or dealers who operate for profit.
