Obnews Automobile Desk: In the recent GST Council meeting, GST on second hand cars was increased from 12% to 18%. This increase is straight 50%. This has created a stir in the second hand car market. But the question arises that how much impact will this have on the pocket of a common customer?
What is the statement of Finance Minister Nirmala Sitharaman?
Finance Minister Nirmala Sitharaman clarified that GST will be imposed only on profit margin. For example, if you bought a new car for Rs 12 lakh and sold it for Rs 9 lakh, then resold the car for Rs 10 lakh, then the profit of Rs 1 lakh will attract 18% GST. This means that there will be no tax on the loss.
How much will customers be affected?
According to the ET report, the main impact of this GST increase in the second hand car market will be on dealers like Cars24, Maruti True Value, Mahindra First Choice, and Spinny.
Example: Impact of GST on second hand Maruti Dzire
Suppose you sold your old Maruti Dzire for Rs 4 lakh. The dealer refurbishes it and sells it for Rs 4.50 lakh. Now:
- 18% GST = Rs 9,000.
- If old 12% GST was applicable, then = Rs 6,000.
- That means, GST increased by Rs 3,000.
This way, the overall price of the car will increase by just less than 1%.
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What do dealers say?
Dealers say that this increase will not have much impact on the budget of customers. Due to GST on resale margin, the tax burden will be minimal.
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