GST On Second-Hand Cars Raised To 18%: Here’s Check The Details

On Saturday, the GST Council met with Finance Minister Nirmala Sitharaman as chair. During the meeting, the second-hand car tax slab was raised from 12% to 18%, prompting concerns about the potential impact on India’s formal used car industry.

The revision, which applies to automobiles sold through registered dealers and internet marketplaces, is expected to result in a considerable shift towards informal channels for buying and selling secondhand cars. However, individuals selling or purchasing old vehicles will continue to pay the reduced 12% tax.

Under the current system, used petrol, LPG, and CNG cars having an engine size of 1200cc or more and lengths exceeding 4000mm are taxed at 18%. Similarly, diesel vehicles with engine sizes of 1500 cc or higher, as well as SUVs with engines larger than 1500 cc, fall into this tax group.

Several industry professionals have expressed worries about an increase in the GST rate on used cars. Calling used cars the backbone of mobility for Indians, especially in Tier 2 and Tier 3 cities, Cars24’s Vikram Chopra urged the government to “look at the bigger picture.”

“Used cars don’t just help individuals—they fuel economic growth by supporting thousands of small businesses, from dealers to service providers, and contribute to a circular economy by extending the lifecycle of vehicles,” Chopra said.

Therefore, businesses that rely on depreciation benefits will have to devise new policies to adapt to a higher tax impact.