Major Setback for Used Car Buyers: GST to Increase from 12% to 18%

New Delhi (The Uttam Hindu): Going by the market trends, the sales of the old and used vehicles have picked momentum. Many automobile companies had been selling their second-hand and old vehicles at low quotes. However, buyers buying these vehicles will face hike in prices. The council of GST has proposed 18% as GST of electric vehicles (EV) and old and used automobiles from the present 12%, which may make the old and second-hand vehicles costlier in case that decision is made.

As reported, the Fitment Committee of the GST Council has suggested a rise in the GST rate for old EVs, along with used vehicles, to 18% from the current 12%. As the tax applied to these vehicles is based on the margin of the supplier, this helps keep the tax burden relatively low. However, the GST rate on new EVs is currently 5% to encourage growth in the sector. The second-hand EVs attract an 18% GST on resale, which may make the second-hand EV market less attractive for buyers.

This further implies that the input parts and services used in the repair and maintenance of second-hand vehicles are subject to the GST rate of 18%. It increases the cost of doing business in the used car market. If this is imposed, then the total tax on selling second-hand vehicles might go up, reducing demand. This could happen more profoundly in the used EV market, impacting sales.

The GST Council has scheduled its 55th meeting for December 21 in Jaisalmer, Rajasthan. Union Finance Minister Nirmala Sitharaman, along with state finance ministers, will participate in the meeting, where this proposal is expected to be discussed further.