Thu Dec 26 09:47:46 UTC 2024: ## GST on Used Cars Jumps to 18%, Impacting Dealers More Than Consumers
**NEW DELHI** – The Goods and Services Tax (GST) on used cars in India has increased from 12% to 18%, a move announced by the GST Council following their latest meeting. While this hike is expected to increase the price of used vehicles purchased from dealerships and online platforms, individuals selling cars directly to each other will be unaffected.
The change applies to the margin earned by dealers and platforms. For example, if a platform buys a car for ₹1 lakh and sells it for ₹1.4 lakh after repairs, the 18% GST applies to the ₹40,000 profit margin. This is a significant increase from the previous 12% rate and is likely to be passed on, at least partially, to consumers purchasing from these sources. Electric vehicles are also subject to the new 18% rate.
While some platforms may absorb the increased tax, many are expected to raise prices, potentially impacting the affordability of used cars. However, tax partner Saurabh Agarwal of EY suggests the change may even lower prices of used electric vehicles if the profit margin remains below 27.78% of the purchase price.
The increased tax burden is expected to significantly affect the used car dealership industry, which sold nearly 51 lakh units in FY2022-23, surpassing new car sales. While the move aims to harmonize tax slabs, startup margins may be impacted in the short term, though input tax credits can offer some offset. The impact on consumers buying directly from individuals, however, should be minimal.
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