Additional cess above GST to be removed on used car sales

Earlier Maharashtra had enforced an additional road tax of 2 percent on varying vehicle rates over and above the GST on purchase of new vehicles. This 2 percent cess was to replace the existing octroi duties in the state.

Earlier Maharashtra had enforced an additional road tax of 2 percent on varying vehicle rates over and above the GST on purchase of new vehicles. This 2 percent cess was to replace the existing octroi duties in the state.

NEW DELHI: Good news seems to be in the offing for the used car market. The additional cess of 15 percent that was to be imposed on certain categories of second hand vehicles will now not be chargeable, according to a recent notification by the Under-secretary to the Government of India.

For instance certain categories of larger vehicles in the above 4 metre range were slapped with 28 percent GST plus 15 percent cess that rounded off the GST rate to 43 percent similar to what some new cars or new hybrid cars attracted in terms of tax structure.

Now as per the latest Government notification, a flat 28 percent GST will be chargeable on dealers margins when they sell a pre-owned car with the tax structure inbuilt into the vehicle price payable by the customer.

Industry experts who ETAuto contacted were guarded in their response and did not wish to be quoted till they had checked up with their financial experts. But overall they felt it was not a simple decision as different states may follow different rates as Maharashtra had earlier had a VAT of 2.02 percent on sale value of the used car that would now be replaced.

Earlier Maharashtra had enforced an additional road tax of 2 percent on varying vehicle rates over and above the GST on purchase of new vehicles. This 2 percent cess was to replace the existing octroi duties in the state.

A similar line could be toed in the case of pre-owned cars as well caution experts.

Abdul Majeed, Partner-automotive PwC India says the step will have its pros and cons but it should boost demand in the pre-owned vehicle market.

Also Read: Premium cars eat into entry-level pie

Meanwhile, the notification goes on to say that the Central Government on the recommendations of the GST Council and in public interest exempts intra-state supplies of second hand goods received by a registered person dealing in buying and selling of second hand goods and who pays the GST compensation cess on the value of outward supply of such second hand goods as determined by sub-rule 5 of Rule 32 of the Central Goods and Services Tax Rules 2017 from any supplier who is not registered from the whole of the goods and services tax compensation cess, leviable on section 8 of the GST Act.

While financial wizards put their heads together and read between the lines, the exemption of additional cess should come as a respite to the pre-owned car industry.

[“Source-economictimes”]