GST Council Raises Tax on Used Cars Sold by Dealers to 18%

GST Council hiked the tax rate of used cars sold by the registered dealers from 12% to 18%. This new rate will apply on the dealer's profit margin, but not on the value of the car. It might hit hard upon the ever-growing used car market, though.

Applicability: This 18% GST applies to all used cars irrespective of whether they are EVs, sold by registered dealers. Individual car sales do not get affected.

Market Impact: Over 5 million used cars were sold in 2023-24. The higher GST can further widen the price difference between cars sold by an organized market and an unorganized market.
Previous Tax Structure: Earlier, vehicles with engine capacity up to 1200 cc were taxed at 12% while bigger vehicles and SUVs were taxed at 18%. The new rate standardizes GST at 18% for all used cars sold by dealers.

Industry and Public Reaction

Social Media Buzz: The discussions on X (formerly Twitter) are mostly on the financial burden that will fall on consumers and whether it will slow down demand for budget-friendly used cars.
Concerns: Most believe that the new rate will deter buyers from using used cars, especially EVs, which were taxed at lower rates when new.

Rationale and Implications

The GST Council is trying to simplify and standardize all tax rates on various categories of vehicles. Still, there are certain apprehensions that the move may hurt demand in the used car segment, which has been expanding rapidly. Dealers will be forced to adjust their price strategies to remain competitive.