GST on Used Cars Raised to 18%: Buying Pre-Owned Vehicles Gets Costlier

New Delhi (The Uttam Hindu): From January 1, 2025, purchasing cars within India is set to become more expensive, with most automakers announcing price hikes of up to 4%. This makes December 31, 2024, the last chance to buy a car at current rates. However, buyers of used cars face additional challenges, as the GST Council has raised the tax on pre-owned vehicles from 12% to 18% following its 55th meeting.

The new GST rates will apply exclusively to cars sold through registered dealers or companies in the second-hand vehicle sector. If you sell a car directly to another individual, this higher GST will not apply. Similarly, buyers purchasing cars directly from individuals will pay the previous 12% GST instead of the new 18% rate.

For electric vehicles (EVs), the GST hike applies to used EVs as well, meaning buyers will pay 18% GST when purchasing through a dealer, whereas new EVs continue to attract only 5% GST. This increase reduces the price gap between new and old vehicles and is likely to affect the demand for used cars. For example, if a car is sold to a friend or relative for ₹13 lakh, no GST is applicable. However, if a dealer buys the same car for ₹13 lakh and sells it for ₹17 lakh, GST will be charged at 18% on the profit margin of ₹4 lakh. This rule applies to petrol, diesel, and electric vehicles alike, driving up the overall cost of second-hand cars.