Understanding the GST Changes on Electric Vehicles
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New Delhi, December 24 (NationPress) - Finance Minister Nirmala Sitharaman has made it clear that the increase in GST from 12% to 18% concerning the sale of second-hand electric vehicles (EVs) will be applicable solely to business entities engaged in the resale of used EVs. This adjustment does not pertain to individual sellers of second-hand electric vehicles.
At the press conference following the 55th GST Council meeting held on Saturday, the panel sanctioned the elevation of the GST rate on pre-owned EVs sold by businesses from 12% to 18%.
While specifying that the taxation for business entities will be based on the margin value rather than the full resale price, Sitharaman stated, "Discussions were centered on the margin value. The 18% GST will only be imposed on the margin value, which is the difference between the acquisition cost and the resale price."
For instance, if a used car dealer acquires an EV for Rs 9 lakh and sells it for Rs 10 lakh, the GST will apply solely on the Rs 1 lakh profit margin. However, transactions directly between individuals are exempt from this tax.
The GST rate hike aims to harmonize the taxation of used EV sales with that of petrol and diesel vehicles that feature larger engine capacities, which are already subjected to an 18% tax.
This clarification was issued alongside the Council’s formal announcement, outlining that the decision was formulated to standardize tax treatment across all vehicle types, which includes used petrol, diesel, and electric vehicles.
The Finance Minister further clarified that the GST on new EVs continues to be set at 5%, as the Government remains committed to promoting electric vehicle adoption to mitigate pollution.
The GST council has proposed raising the GST rate to 18% on the margin value for second-hand car sales involving specified petrol vehicles with 1200 cc or greater and diesel vehicles of 1500 cc or more, encompassing all EVs sold by business entities, to establish uniformity in second-hand vehicle sales, as clarified by senior officials.
