Buying a second-hand EV may cost you more next year
The Goods and Services Tax (GST) Council is mulling a proposal to hike the GST rate on old and used electric vehicles (EVs), as well as smaller petrol and diesel cars. The proposed tax hike, from the current 12% to 18%, was recommended by the Council's Fitment Committee. The proposal will be taken up at the Council's meeting on December 20-21 in Jaisalmer, Rajasthan.
Potential impact on used EV market
The proposed tax hike could also make second-hand EVs less appealing to prospective buyers. Currently, new EVs benefit from a lower GST rate of 5% to encourage green mobility. However, used EVs, which currently attract 12% tax, could be shifted to the higher 18% tax bracket if the proposal is approved. This could impact their affordability in the resale market.
Current GST structure for old and used vehicles
The GST on old and used cars is levied on the supplier's margin, which is the difference between the selling price and the purchase cost or the depreciated value of the vehicle. Currently, petrol cars with an engine capacity above 1.2-liter and length over 4,000mm are taxed at 18%. Diesel models with an engine capacity above 1.5-liter and length over 4,000mm, and SUVs with engines above 1.5-liter also fall under this tax category.
Proposed tax alignment for smaller cars and EVs
Currently, all other cars including EVs and smaller models attract a 12% tax rate. The Fitment Committee has proposed that vehicles in this category should be taxed at 18%, just like larger cars and SUVs. If this is implemented, all old and used vehicles would be uniformly taxed at 18%, which would be a significant departure from the tax treatment of smaller cars and EVs.
