GST Charged On Second-Hand EVs, Small Petrol And Diesel Vehicles Hiked To 18 Per cent

The Goods and Services Tax (GST) Council has approved an increase in the rate of GST charged on the sale of pre-owned small petrol and diesel cars and electric vehicles. The rate has been hiked to 18% from the existing rate of 12% which was charged on the resale of such vehicles. However, the individual sale and purchase of vehicles will continue to be taxed at 12 per cent.

The rule is applicable on the resale of small petrol and diesel vehicles and electric vehicles. The move is likely to impact the second-hand car market for old and used vehicles. The rate hike was announced on December 21 at the 55th GST Council meeting, chaired by Finance Minister Nirmala Sitharaman. The meeting was attended by ministers from 28 states, 2 Union Territories, and tax officials. The Chief Ministers and Deputy Chief Ministers of five states were also present at the meeting.

Earlier this year the Fitment Committee of the GST Council recommended increasing the GST rate on the resale of EVs to 18 per cent. Prior to the increase the sale of electric vehicles (EVs) was taxed at 12 per cent under notification No. 08/2018-Central Tax (Rate), dated January 25, 2018.

The GST rate applicable on the resale of petrol vehicles and LPG and CNG-powered vehicles with engine capacities of 1200cc and above with a length of over 4000 mm or more is 18 per cent. The GST rate applied on the resale of diesel vehicles with an engine capacity of 1500cc or more and a length of 4000mm or more is also 18 per cent.

A concessional 5 per cent GST rate is charged on the purchase of new EVs in order to boost their usage. However, the sale of EVs in the second hand automotive market is likely to be impacted as the 18% tax slab is likely to make the vehicles more expensive. Additionally, input parts and other services related to the repair and maintenance of second-hand vehicles already attract 18% GST, with the new tax slab for EVs the operational costs of owning a second-hand electric vehicle are also likely to increase.

A proposal to charge 5% GST on ready-to-eat popcorn with salt and spices (if not pre-packaged), 12% GST on pre-packaged popcorn, 18% on caramel popcorn, and 5% GST on fortified rice kernels was also announced at the GST Council Meeting.