Quick Summary
The GST Council's recent proposal to increase the Goods and Services Tax (GST) rate on used vehicles from 12% to 18% has sparked concerns about its potential impact on India's formal used car market. The revised rate, applicable to vehicles sold through registered dealers and online marketplaces, is expected to shift a significant portion of used car transactions to informal channels, undermining the growth of the organized sector. Growing Reliance on Informal Channels According to a LocalCi
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FAQ :
The GST Council has proposed increasing the Goods and Services Tax (GST) rate on used vehicles from 12% to 18%.
The revised GST rate will apply to used vehicles sold through registered dealers and online marketplaces.
The primary concern is that the increased GST rate will drive more used car transactions to informal channels, away from the formal, organised market.
According to a survey, nearly 42% of used car transactions currently occur outside formal platforms, a figure expected to rise with the GST hike.
India's used car market is valued at $32.44 billion and is projected to surpass $73 billion by FY28.
Reasons cited include trust issues, preference for dealership trade-ins, reliance on personal connections, and a desire to avoid taxable transactions.
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