Representative image of a used car being sold.
Credit: iStock Photo
Bengaluru: The latest proposal of the goods and services tax (GST) Council to raise the GST rate on the sale of old and used vehicles from 12 per cent to 18 per cent is expected to adversely impact the growth of trade through formal and online channels, a survey from LocalCircle showed on Monday.
Currently, 42 per cent of surveyed used car consumers conduct transactions through unofficial channels and that number is expected to shoot up following the Council’s decision.
The GST Council, which met over the weekend, approved an increase in GST for used vehicles, including electric vehicles (EVs), applicable on the value that represents margin (difference between the purchase and the selling price) by resale platforms which facilitate these transactions like Cars24, Carwale, etc.
Conversely, individuals selling or buying old vehicles will continue to be taxed at the lower 12 per cent rate. On the other hand, only 10 per cent of these consumers conducted transactions through online classified websites like OLX auto.
A majority of the respondents (30 per cent) bought or sold within their close social network, while 25 per cent of the consumers relied on a trade-in at a dealership and bought a new vehicle.
Consumers cited lack of trust when it came to using online marketplaces or auto dealerships, especially because these transactions involve a hefty amount.
India’s used car organised market, which is $32.44 billion, is expected to more than double to $73 billion by FY28, according to the Indian Blue Book report by used car sellers CarandBike and Das WeltAuto.
The demand for pre-owned luxury cars has been rising at around 35-40 per cent on a year-on-year (YoY) basis as owners of luxury cars usually sell off their vehicles after a year or two and upgrade to better models, stated market research company Mordor Intelligence.
As local dealers and online players expand the market, demand from tier-1 and tier-2 cities is also being witnessed.
The survey received over 23,000 responses from consumers who bought or sold a used car (single use) from 288 districts of India. About 45 per cent respondents were from tier 1, 23 per cent from tier 2 and 32 per cent respondents were from tier 3, 4, 5 and rural districts.