Debunked: Increased Tax On Used Small Cars, EVs To Not Impact Individuals

The used car market in India packs strong momentum. It was valued at USD 32.44 billion in FY 2023 with a cumulative sales of 51 lakh cars. The market is expected to expand exponentially and reach over 1 crore units annually by FY28 with a revenue of USD 73 billion. However, the GST council has recently introduced a new tax regime for the organized sector of the used car market. The council has increased the GST rate for used small cars and EVs from 12% to 18%. While the masses are seeing it as a stepping stone in the used car space's growth, there's more to it than what it looks like.

Will Used Cars Get Expensive?

In clear words, the answer is both yes and no. Well, the GST is charged to the registered dealer or organization on the profit it makes on selling a car. The GST isn't levied on the value of the car. Also, it is applicable to the organized sector of the used car business. Individual sellers and buyers will not have to pay the tax. However, the business might pass on the share of this tax to the buyer, eventually adding a minimal hike to the prices.

Was There No Tax Earlier?

No, earlier the smaller cars, those with a displacement of less than 1200cc were subjected to a 12% GST rate, while the larger cars invited an 18% GST. From now onwards, a flat tax slab of 18% will be levied on all cars, including electric vehicles.

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In fact, the GST was charged at 28% with an additional cess that ranged from 1% to 15% prior to the year 2018, when the GST council brought the tax to 12% to 18%. Also, the additional cess was removed.