GST Council: Used EVs bought by companies or modified and sold by sellers to be taxed at 18% on margin value, says FM

The 55th GST Council meeting on Saturday (December 21) outlined the Goods and Services Tax (GST) structure for electric vehicles (EVs). Finance Minister Nirmala Sitharaman said that new EVs attract a 5% GST and the Council aims to promote the adoption of electric vehicles.

In a key clarification, Sitharaman stated that used EVs will not attract GST when sold between individuals.

However, used EVs bought by companies or those modified by sellers and then sold will be taxed at 18%, with GST applicable on the margin value between the purchase and selling price.

She emphasised that the decision to apply 18% GST on used EVs was not arbitrary. While the Centre initially proposed a 5% rate, the final decision was made after thorough discussions within the GST Council.

On the topic of the compensation cess, Sitharaman stated that there is no specific timeline for the Group of Ministers (GoM) to address the issue.

The Council has yet to finalise any changes regarding the compensation cess.

Separately, the Central Board of Indirect Taxes and Customs (CBIC) clarified that the compensation cess on SUVs will be applied prospectively, with no retrospective impact on vehicles that have already been sold.

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