GST Council to decide on 18% tax for used EVs and smaller vehicles, up from 12%

The GST Council might raise the Goods and Services Tax (GST) on old and used electric vehicles (EVs) and smaller petrol and diesel vehicles. The tax rate could increase from 12% to 18%, based on a recommendation by its Fitment Committee.

This proposal will be discussed at the council’s meeting on December 20-21 in Jaisalmer, Rajasthan, according to sources cited by CNBC TV18.

If implemented, this move could make second-hand EVs less appealing to buyers. Currently, new EVs benefit from a concessional 5% GST rate to encourage green mobility. However, used EVs, which are currently taxed at 12%, may be reclassified into the higher 18% tax slab, potentially reducing their affordability in the resale market.

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The GST on old and used vehicles is applied only to the supplier’s margin—the difference between the selling price and the purchase price or the depreciated value of the vehicle.

Under the existing system, petrol vehicles with an engine capacity exceeding 1200cc and a length over 4000mm attract an 18% GST. Similarly, diesel vehicles with an engine capacity above 1500cc and a length over 4000mm, as well as SUVs with engines exceeding 1500cc, are also taxed at 18%.

In contrast, all other vehicles, including EVs and smaller cars, currently fall under the 12% tax bracket.

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The Fitment Committee has recommended that vehicles in the 12% category, including EVs, should be taxed at 18%, bringing them in line with larger cars and SUVs.

The GST Council will make a final decision on the proposal at its next meeting. If approved, all old and used vehicles would be uniformly taxed at 18%, representing a significant change in the tax treatment of smaller cars and EVs.

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