Thu Dec 26 08:31:32 UTC 2024: ## GST Council Raises Tax on Used Car Sales, Including EVs

**New Delhi** – The GST Council has approved a significant increase in the Goods and Services Tax (GST) rate on used car sales, impacting a wide range of vehicles including electric vehicles (EVs). Effective immediately, an 18% GST will be levied on the margin of used car sales for most vehicles.

This increased rate applies to electric vehicles, petrol cars with engines exceeding 1200cc or a length over 4000mm, diesel cars with engines exceeding 1500cc or a length over 4000mm, and SUVs. Cars falling below these specifications will continue to be taxed at the current 12% rate.

Crucially, the new rule exempts private sales between unregistered GST sellers. Furthermore, the Council has not introduced any new reverse charge liabilities.

While most businesses cannot claim input tax credit (ITC) on car purchases, dealerships and transporters can. However, chartered accountant Bimal Jain clarifies that businesses eligible for ITC must pay GST on the sale value, not the margin. Only those ineligible for ITC will pay GST on the margin. No GST is payable if a loss is incurred on the sale.

Used car dealers can utilize a “margin scheme” if they don’t claim ITC, paying GST only on the profit margin (the difference between sale and purchase price, or depreciated value). Losses on used car sales cannot be offset against profits from other sales. The changes are expected to impact the used car market significantly.

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