GST Council Eyes Tax Hike on Used EVs and Cars: What You Need to Know
The GST Council meeting scheduled for December 20-21, 2024, in Jaisalmer, Rajasthan, is set to discuss a GST hike on used cars and electric vehicles (EVs). Currently taxed at 12%, the proposal suggests raising this rate to 18%, which could reshape the second-hand vehicle market significantly.
Why a GST Hike on Used Cars and EVs?
The rationale behind this proposed hike is to align the taxation of used vehicles with that of new vehicles and luxury models. Simplifying tax structures and boosting revenue are key goals. Here’s a breakdown of the potential changes:
| Vehicle Type | Current GST Rate | Proposed GST Rate |
|---|---|---|
| Used Electric Vehicles | 12% | 18% |
| Used Small Petrol/Diesel Cars | 12% | 18% |
Impact of GST Hike on Used Cars
- Used EVs: Currently taxed at 12%, the jump to 18% could make second-hand EVs less appealing to budget-conscious buyers. This comes at a time when the government is promoting clean energy through incentives for new EVs, which are taxed at just 5%.
- Small Petrol and Diesel Cars: The increase from 12% to 18% could similarly dampen demand for affordable used cars, impacting middle-income buyers who rely on the second-hand market.
Potential Effects on the Market
- Affordability Challenges: Higher taxes on used EVs and petrol/diesel cars could make them less accessible to buyers.
- Market Dynamics: Dealers of second-hand vehicles may experience slower sales, particularly in the EV segment.
- Consumer Shift: Buyers may opt for new vehicles due to the reduced price gap between new and used cars.
Relevant Case Laws and Industry Trends
- Madhya Pradesh High Court recently ruled against flawed GST notices, emphasizing clarity in taxation policies.
- Industry Insights: With India’s push towards clean mobility, the new GST structure might conflict with the goal of wider EV adoption.
Conclusion: What’s Next?
The GST hike on used cars and EVs, if approved, could reshape buyer preferences and the second-hand vehicle market. As the GST Council meets to decide, all eyes are on how this will balance revenue goals with India’s clean mobility ambitions.