Goods and Services Tax came into effect applicable from 1st July 2017. Goods & Services Tax is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. The Council has broadly approved the GST rates for services at Nil, 5%, 12%, 18% and 28%. When GST came into effect there were notions for and against it. The GST tax rates were appreciated for some products like Salt, Milk, Meat, Eggs etc. which had tax rate of 0% which were considered to be basic needs, whereas, Pan Masala, Tobacco, Automobiles, Paint etc. were burdened with tax rate of 28% as they were considered to be luxurious products received lots of criticism.
With lots of controversies on the tax rates and Lok Sabha general election in 2019, the present government held a meeting with the GST council before the presentation of Budget 2018. There were some changes made in the tax rates of few products and thankfully for the used automobile the tax revised to 12% and 18% for pre-owned small and large cars respectively which will come into effect from 25th January 2018. New GST rate will only be applicable when a used car dealer sells a car to an individual and not on an individual to individual deal. The meeting of the GST council slashed the tax rates on as many as 29 items. Besides used cars, the GST council also slashed the tax rates on public transport buses that source energy from the green fuel.
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Current GST rates and its effects on automobile industry
At present, the tax rate is 28% due to which the sales of the new and pre-owned cars had a decline last year. SIAM (Society of Indian Automobile Manufacturers) had earlier urged the Government to cut down the GST rates to improve the sale of used cars in India. Due to the heavy tax which is being levied on the sales of pre-owned cars, there had been a significant decline in the buying and selling of used car and this industry has been hit very badly by the current GST tax rates. Most of the used car dealers had to pay heavy duty due to which many shifted to one wheeler which was giving more profits compared to cars.
New GST rates to bring spark to pre-owned sector
India is one of the fastest growing nations in pre-owned cars business. The revived GST rates will be applicable from 25th January 2018 and since the rates have been cut to 12% and 18% for small and big cars respectively we can say that this sector will come back to the track and grow at a very fast rate. Some important takes from the new GST rule for pre-owned car sector are: (a) GST rates will not be applicable in case an individual sells his car to another individual or a dealer, (b) A used car dealer who sells a car to an individual will have to pay the GST and it is applicable to the margin amount. GST was levied to make the tax system simple and easy for everyone. With the revised tax rates we may hope that this time it will be in favour of everyone. And with cutting down of rates in cars which is becoming a status symbol in India we can hope that there will be a significant amount of growth in sales of pre-owned cars as they will now be cheaper and more affordable.
Must read: Documents required for Purchasing a Used Car
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