New Delhi, Dec 24 (IANS): Finance Minister Nirmala Sitharaman has clarified that the increase in GST from 12 per cent to 18 per cent on the sale of second-hand EVs will apply only to business entities involved in the resale of used electric vehicles. This increase in GST does not apply to individuals selling second-hand electric vehicles.

During the 55th GST Council meeting press conference on Saturday, the panel approved an increase in the GST rate on used EVs sold by businesses to 18 per cent from 12 per cent earlier.

While clarifying that the tax even for business entities would not be on the entire resale amount and only the margin value, Sitharaman said, "When the discussions happened, it was on that margin value. The 18 per cent GST will be levied only on the margin value between purchased product price and resale price.”

For example, if a used car dealer purchases an EV for Rs 9 lakh and resells it for Rs 10 lakh, the tax will apply only to the Rs 1 lakh profit margin. However, direct transactions between individuals do not come under this tax.

The GST has been increased to bring uniformity in the GST rate charged for businesses on the sale of used EVs with that of used petrol and diesel vehicles with larger engine capacities, which are already taxed at 18 per cent.

This clarification came alongside the Council’s official release, which detailed that the decision was aimed at standardising the tax treatment for all vehicles, including used petrol, diesel, and electric vehicles.

The Finance Minister also made it clear that the GST on new EVs remains at 5 per cent as the Government’s policy is still aimed at promoting the use of electric vehicles in order to reduce pollution.

The GST council has recommended an increase to 18 per cent in the GST rate on the margin value of used car sales for specified petrol vehicles with 1200 cc or more and diesel vehicles with 1500 cc or more, and all EVs sold by business entities to bring uniformity among the second-hand sales, senior officials clarified.