GST Council Approves Hike in Tax Rate on Sale of Old and Used Cars, Including EVs: Sources

The Union Finance Minister Nirmala Sitharaman chaired the 55th meeting of the GST Council today (21st December 2024) at Jaisalmer, Rajasthan. The GST Council decided to increase the tax rate on the sale of old and used cars, including electric vehicles (EVs), from 12% to 18%.

Who it affects? The new tax rate applies to all types of used vehicles, including petrol, diesel, and electric cars. Earlier, the GST on used EVs was 12%, and new EVs had a lower rate of 5% to promote eco-friendly transport.

This increase will make second-hand vehicles more expensive, which could reduce demand in the used car market. Dealers might face higher costs since repairing and maintaining used vehicles already attracts 18% GST. This could also lower their profits.

The government aims to increase revenue through this tax hike, critics argue that it may have unintended consequences, such as slowing the adoption of EVs and affecting the overall automotive market's growth.

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There is concern that higher taxes on used vehicles could push more transactions into the unorganized sector, where GST compliance is lower, potentially undermining the policy's effectiveness.

Additional Decisions:

According to the sources, the GST Council also addressed other taxation matters during the meeting:

Autoclaved Aerated Concrete (AAC) Blocks: AAC blocks with over 50% fly ash content will now attract a reduced GST rate of 12%, down from 18.

Fortified Rice Kernels: A uniform GST rate of 5% has been implemented for fortified rice kernels, simplifying the previous tax structure.

Complete Draft Replies of GST ITC Related Notices, Click Here

Ready-to-Eat Popcorn: Clarifications were provided regarding GST rates on ready-to-eat popcorn, with variations based on flavoring and packaging.

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