In a move that could affect the resale market for old and used electric vehicles, the GST Council’s Fitment Committee has proposed increasing the Goods and Services Tax (GST) rate on such vehicles from 12% to 18%.
This suggested hike would also apply to old and used electric vehicles (EVs), which are currently taxed at the lower 12% rate under notification No. 08/2018-Central Tax (Rate), dated 25 January 2018.
At present, old and used vehicles are taxed based on the supplier’s margin, making the effective tax incidence relatively low.
The current GST rates are as follows: 18% for petrol, LPG, or CNG-driven vehicles with an engine capacity of 1200cc or more and a length of 4000mm or more; 18% for diesel vehicles with an engine capacity of 1500cc or more and a length of 4000mm or more; and 18% for sports utility vehicles (SUVs) with an engine capacity exceeding 1500cc. All other vehicles, including EVs, attract a 12% GST rate.
The Fitment Committee’s recommendation to increase the rate for these “other vehicles” to 18% aligns with the existing tax structure for larger vehicles and SUVs. While EVs currently benefit from a concessional 5% GST rate when sold new to promote the growing sector, their reclassification under the 18% slab when resold could make second-hand EVs less appealing to buyers.
Input parts and services used for the repair and maintenance of second-hand vehicles already attract an 18% GST rate, which adds to operational costs in the used car market. If the proposed GST rate hike is implemented, the industry may face higher overall taxation on second-hand vehicle sales, potentially dampening demand in this segment.
The GST Council is expected to discuss this recommendation at its upcoming meeting, scheduled to be held on 20 and 21 December in Jaisalmer, Rajasthan.
Follow us
