GST Hike to 18% Threatens Slowdown in India’s Used Car Market
India’s $32-billion pre-owned cars market is expected to witness a slowdown after the Goods and Services Tax (GST) Council decided to increase the tax rate on used cars from 12 percent earlier to 18 percent now, according to several industry stakeholders.
The GST council, on December 21, decided to hike the tax rates on all used cars, including electric vehicles. To be sure, the revised tax rates only apply to vehicles bought by businesses and on the value that represents the margin of a supplier (difference between the purchase price and selling price, including depreciated value if benefits claimed).
Individuals buying and selling old vehicles will still continue to be taxed at 12 percent.
“In a country with single-digit car ownership, policies that impact affordability, like the recent GST hike, can unintentionally slow down this progress,” said Vikram Chopra, co-founder and CEO of online used car marketplace Cars24.
The Council’s decision to hike GST rates comes when the sector is still nascent and growing. In FY23, a total of 51 lakh used cars were sold in India and the industry was worth $34 billion. From there, the sector is expected to grow to $73 billion and sell 1.09 crore used cars by FY28, according to the latest Indian Blue Book (IBB) report by 'car&bike' and 'Das WeltAuto by Volkswagen'.
