A proposal to raise the GST rate on used small automobiles, including electric vehicles, from 12% to 18% was agreed at the Goods and Service Tax (GST) Council meeting. When registered dealers or individuals sell a used car, GST is charged on the margin or profit made from the sale rather than the vehicle’s worth. It does not apply to individuals who are not registered.
Small automobiles and electric vehicles now have the same GST rates as larger cars and SUVs thanks to this decision. Prior to this modification, used cars with engines larger than 1200cc had to pay an 18% tax. On the other hand, the tax rate was reduced to 12% for those with engines up to 1200cc.
Registered dealers will be impacted by the recent change in the GST rate. Unorganized and unregistered vendors still account for a sizable portion of secondhand car transactions. The price difference between cars sold by organized and unorganized players may increase even more as a result of the recent tax rate increase.
Previously, there was a 28% GST on the sale of used cars in addition to a 1–15% supplementary cess. The GST council made a big shift in 2018 by eliminating the extra cess and lowering the GST on secondhand autos to between 12 and 18%.
Due to the significant increase in the cost of new entry-level cars over the past two years, buyers are now paying more for the amenities and size they want. Because of this, a lot of people are choosing used cars as they are less expensive. According to several automakers, old cars are now directly competing with the new entry-level models, with an average selling price of between Rs 4.5 and Rs 5 lakh.