GST Hike to 18% on Used Cars Raises Concerns in Pre-Owned Car Market
GST Hike to 18% on Used Cars Raises Concerns in Pre-Owned Car Market (Et auto - picture credit )
The GST Council’s decision to raise the Goods and Services Tax (GST) on used cars from 12% to 18% has sparked concerns in the pre-owned car market. The announcement on December 21 aligns the tax structure for vehicles but could burden businesses and consumers alike.
Currently, used petrol, LPG, and CNG vehicles with engine capacities of 1200cc or more and lengths exceeding 4000mm, along with diesel vehicles above 1500cc and SUVs, attract an 18% tax. The new rule extends this tax to vehicles previously taxed at 12%, including older electric vehicles (EVs) resold by businesses. However, private transactions remain exempt from the hike.
Industry experts warn that the increased rates could impact the affordability of used cars. Businesses may pass the higher tax burden onto consumers, making second-hand vehicles costlier. Vikram Chopra, founder of Cars24, called used cars the “backbone of mobility,” particularly in Tier 2 and Tier 3 cities. He urged the government to reconsider, emphasizing the economic role of used cars and their contribution to sustainability.
Chopra highlighted the need for clear policies on responsibly dismantling end-of-life vehicles and incentivizing green practices instead of raising taxes.
The used car market in India, valued at $34 billion in FY23 with sales of 51 lakh units, is expected to grow to $73 billion by FY28. However, higher taxes and the existing 18% GST on spare parts could dampen demand.
The resale of EVs is also likely to be affected. While EV sales grew 90% in FY24, industry analysts warn that the tax increase could slow adoption, adding to challenges like low resale values. This decision could alter the dynamics of India’s growing second-hand vehicle market.
