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Hiked GST on Used Cars Explained: What It Means for Private Sellers and Businesses
The GST Council has announced an increase in the Goods and Services Tax (GST) on used cars
What It Means for Private Sellers and Businesses
The GST Council has announced an increase in the Goods and Services Tax (GST) on used cars, raising the rate from 12% to 18% for vehicles sold by businesses. This update includes electric vehicles (EVs) and aims to standardize the taxation framework for used cars. However, individual car sellers engaging in private sales can rest assured—these changes do not affect them.
GST on Used Cars: Key Changes
Previously, the GST rate of 18% applied to specific vehicle categories, such as large petrol or diesel cars and SUVs. The new rules expand this to all used vehicles sold by businesses or dealers, including smaller cars and EVs.
The GST will now be calculated on the profit margin—the difference between the vehicle’s purchase price and resale price. If depreciation has been claimed, it will also be accounted for, ensuring only the seller’s profit is taxed, not the entire sale amount.
Impact on Electric Vehicles (EVs)
One noteworthy aspect of this change is its impact on used EVs. New EVs currently enjoy a reduced GST rate of 5% to promote their adoption. However, the 18% GST on used EVs could discourage potential buyers, making these vehicles less appealing in the second-hand market. This shift might pose a challenge for buyers seeking affordable options in the growing EV segment.
Private Sellers Remain Exempt
One noteworthy aspect of this change is its impact on used EVs. New EVs currently enjoy a reduced GST rate of 5% to promote their adoption. However, the 18% GST on used EVs could discourage potential buyers, making these vehicles less appealing in the second-hand market. This shift might pose a challenge for buyers seeking affordable options in the growing EV segment.