Wed Dec 25 05:27:13 UTC 2024: ## GST Council Unifies Used Vehicle Tax Rate at 18%, Clarifies Implications

**New Delhi, [Date]** – The Goods and Services Tax (GST) Council has decided to simplify the tax structure for old and used vehicles, including electric vehicles (EVs), by implementing a uniform 18% GST rate on all sales. This decision, announced [Date], refutes earlier reports suggesting the imposition of new taxes.

Previously, GST rates varied for used vehicles. The new single rate applies only to sales by registered dealers; private sales between individuals are exempt. Crucially, GST is levied only on the *margin*—the difference between the selling price and the depreciated value (or original purchase price, whichever is lower) as per Income Tax Act, 1961. If this margin is negative, no GST is payable.

For example, a registered dealer selling a car for ₹10 lakh that originally cost ₹20 lakh, with ₹8 lakh in claimed depreciation, would owe no GST because the margin is negative (₹10 lakh selling price – ₹12 lakh depreciated value = -₹2 lakh). However, if the selling price were ₹15 lakh, GST would be payable on the ₹3 lakh margin.

While this change unifies the rate, it represents an increase for some EVs and smaller fossil fuel cars, previously taxed at 12%. Experts like EY Tax Partner Saurabh Agarwal suggest this harmonization, aligning with the tax rate for larger vehicles, is aimed at curbing pollution from the growing used car market.

However, the impact on EV sales is debated. Agarwal argues the change is not a significant deterrent, potentially even lowering costs for used EVs when margins are low. Conversely, AMRG & Associates Senior Partner Rajat Mohan suggests the hike could discourage cost-conscious buyers, affecting EV penetration in the secondary market.

The new regulations require dealers to meticulously maintain transaction records. While the government expects increased revenue, businesses must adapt, and consumers need to understand the implications for resale prices.

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