The Goods and Services Tax (GST) Council has announced a hike in GST on used cars from 12% to 18%. This decision will impact the resale market for vehicles, especially those with engine capacities up to 1200 cc.
What Does This Mean for You?
If you’re planning to buy or sell a used car, here’s what you need to know:
- For Individual Buyers and Sellers: If you’re buying or selling a used car privately, this GST hike won’t affect you. Transactions between individuals are not subject to GST.
- For Registered Dealers: If you’re dealing with a registered dealer, the GST will now be applied to the profit margin made on the sale of the car. For example, if a dealer buys a car for INR 5 lakh and sells it for INR 6 lakh, the GST will be calculated on the INR 1 lakh margin.
- Impact on Prices: Dealers may pass on the increased GST to customers, potentially raising the price of used cars. Alternatively, dealers might absorb the cost, reducing their profit margins.
Used Cars Hike: Why the Change?
The GST Council aims to standardize tax rates across different vehicle categories. Previously, used cars with engine capacities over 1200 cc were already taxed at 18%. The new rate brings smaller used cars and electric vehicles into the same tax bracket as larger vehicles.
Market Impact
The used car market has seen significant growth in recent years, with over 5 million units sold in 2023-24. Certified pre-owned programs by manufacturers and online platforms like Spinny and Cars24 have contributed to this growth. The GST hike could affect the affordability of used cars, potentially slowing down demand.
Final Thoughts
The GST hike on used cars is a significant change that will impact both buyers and sellers. While individual transactions remain unaffected, registered dealers will need to adjust their pricing strategies. The move aims to create uniformity in taxation but may also influence the overall demand for used cars.
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