- The GST rate on used electric vehicles (EVs) may increase from 12% to 18%.
- The proposal aims to bring second-hand EVs in line with the tax rates of larger petrol, diesel, and SUV vehicles.
- New EVs still benefit from a lower GST rate of 5% to promote the sector.
- The GST rate hike on second-hand EVs could reduce their appeal to buyers and slow down demand.
- The GST Council is expected to discuss the proposal during its meeting on December 20-21, 2024.
The GST Council’s Fitment Committee has proposed a significant change that could affect the resale market for used electric vehicles (EVs). The committee has recommended increasing the Goods and Services Tax (GST) rate on second-hand EVs from 12% to 18%. This adjustment would bring used electric vehicles in line with the current tax rates for larger petrol, diesel, and sports utility vehicles (SUVs).
At present, used EVs are taxed at the lower rate of 12% under notification No. 08/2018-Central Tax (Rate), dated January 25, 2018. This tax is applied based on the supplier’s margin, which keeps the effective tax rate low. However, the new recommendation would reclassify used EVs under the 18% GST slab, similar to the tax rates applied to petrol, diesel, and SUV vehicles with higher engine capacities.
Current GST Rates on Vehicles:
| Type of Vehicle | GST Rate |
|---|---|
| Petrol, LPG, or CNG vehicles (1200cc+ & 4000mm+) | 18% |
| Diesel vehicles (1500cc+ & 4000mm+) | 18% |
| Sports Utility Vehicles (SUVs, 1500cc+) | 18% |
| All other vehicles, including EVs | 12% |
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The proposed hike, if approved, would apply to the resale of used EVs, which are currently taxed at 12%. The Fitment Committee’s recommendation to increase this rate to 18% aligns with the tax rates applied to larger petrol and diesel vehicles. While new EVs benefit from a concessional GST rate of 5% to support the growing sector, the shift in tax rate for second-hand EVs could discourage potential buyers, making used electric vehicles less attractive.
Additionally, the GST rate on input parts and services used for the repair and maintenance of used vehicles is already 18%, increasing operational costs in the used car market. If the proposed increase is implemented, the overall tax burden on second-hand EV sales may rise, potentially leading to lower demand in this segment.
The GST Council is set to discuss this proposal during its upcoming meeting on December 20-21, 2024, in Jaisalmer, Rajasthan.
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