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BUSINESS AUTO

Will Second Hand Cars Get Costlier? 18% GST on Used Cars Announced by Nirmala Sitharaman, Netizens React

The GST Council’s decision to raise the tax rate on second-hand cars from 12% to 18% for businesses has stirred debates online. While individual buyers remain unaffected, concerns grow over rising costs and shrinking margins in the used car market.

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18% GST on Used Cars

Photograph: X (formerly Twitter)

GST on Used Cars: The latest GST Council meeting, chaired by Finance Minister Nirmala Sitharaman, has brought a significant change to the resale of second-hand cars. The Goods and Services Tax (GST) on used cars sold by businesses has been increased from 12% to 18%. This decision has sparked a debate among car buyers, sellers, and netizens, with opinions split on whether this will make buying used vehicles more expensive.

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GST Council’s Decision: What Changes for Second-Hand Cars?

The GST hike applies only to businesses selling used cars, particularly those claiming depreciation benefits. Here's a closer look:

Vehicles Affected:

The 18% GST now includes second-hand petrol, diesel, and electric vehicles (EVs) resold by businesses.

EVs, previously taxed at 12%, are now under the 18% bracket.

Who Is Exempt?

Individual buyers and sellers remain unaffected and will continue to pay the lower 12% GST rate.

Impact on Electric Vehicles:

New EVs are taxed at just 5% to promote adoption. However, the higher tax on reselling used EVs might reduce their appeal in the pre-owned market.

Business Perspective:

Input parts and maintenance services for second-hand cars already attract 18% GST. This increase could raise operational costs for companies, potentially impacting margins.

Will Used Cars Become Costlier?

The impact of the GST hike largely depends on how businesses respond. Some people suspect that companies dealing in second-hand cars might:

Offer Lower Buyback Prices: Businesses may reduce the price offered to individual sellers to offset the higher tax burden.

Raise Resale Prices: Dealers could increase resale prices to maintain profitability, potentially making used cars less affordable for buyers.

On the other hand, individual transactions remain unaffected, which means the affordability of personal second-hand car purchases is preserved.

Netizens React to the GST Hike

Social media has been buzzing with varied reactions to the tax increase:

One user humorously wrote: “Thinking of selling your old car? Don’t forget the 18% GST—because nothing escapes the taxman! Second-hand isn't second-class for taxes! Even your used wheels aren't tax-free!”

Another voiced concerns for the middle class: “Lekin purani car jo aksar gareeb log lete hain, uspe bhi 18% GST lagana kya sahi hai? Now if you are middle class, forget about your own second-hand car because buyers always include GST during the time of sale.”

A more analytical take came from another user: “GST on second-hand car sale: Earlier: 12% & 18%. Now - 12% for individuals, 18% for corporates who avail depreciation. Effectively no change in GST rates.”

One user humorously linked the decision to environmental benefits: “Citizens: How will you reduce pollution in the country? Nirmala Tai: If the middle class can't afford a second-hand car, then there will be no pollution. Simple.”

The GST hike on second-hand cars highlights the government’s intent to streamline tax structures while ensuring that individuals are not directly impacted. However, the increased tax rate on businesses may indirectly affect affordability, depending on how car dealers adapt.

Used Cars Finance Minister Nirmala Sitharaman Buying second hand car 18% GST
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