GST Council raises tax from 5 % to 18 % on used EV sold by businesses, opposition leaders over the threat to middle-class families.
Officially, the GST Council increased the tax rate on used electric vehicles (EVs) as sold by businesses, from 12% to 18%. This declaration-amended-announcement was made by the Union Finance Minister Nirmala Sitharaman at the 55th council meeting held on December 21, 2024.
Overview of Tax Structure
Now, the new taxation only includes within its limit the margin value difference between the cost at which that business has bought that vehicle and the price at which it sells the vehicle when the used electric vehicle is sold by a business. Businesses will be taxed on the profit-margin aspect, not the total sales price of the vehicle. The GST Council explained that the individuals who sell their second-hand vehicles will not be subject to GST. This was declared by Finance Minister Nirmala Sitharaman for the relief of individual sellers.
Opposition Reactions
Outrage has been expressed by political leaders regarding the tax hike. For example, Arvind Kejriwal, the Aam Aadmi Party’s (AAP) national convenor, punched at the government’s priorities: the upper class. Such taxation slapping stunts the fancy of a common man, who is aspiring to buy a vehicle. It brings out that car buying is indeed a hefty investment for middle-class families and slams the BJP government for intensifying inflation pressures and financial squeeze.
Just like that, one heard of Akhilesh Yadav, the chief of the Samajwadi Party, criticising it would create a lot of uncertainty for government action. He compared the entire GST framework with a “game of snakes and ladders”, wherein sudden changes in the tax rate would subsequently leave honest businessmen in confusion but favour corrupt practices. He said frequent changes in GST rates create instability for small traders and shopkeepers.
Economic Concerns
Today, a new EV faces a lower GST of 5%, making part of a wider push to go for sustainable transportation in different environmental contexts. Tax benefits on several used EVs could deter possible customers from thinking of purchasing a pre-owned electric vehicle, which will probably affect the growth that the sector requires.
Such a tax increase raises issues on how it would fit in the broader environment about India’s increased adoption of electric vehicles as part of its commitment to reducing carbon emissions. For the moment, the NSE government may do something meaningful to not encourage consumers to convert to greener alternatives by stimulating new EV sales and increasing all costs in used vehicle transactions.
Clarification Regarding Taxation on Popcorn
The GST Council has incorporated popcorn in its list of tax amendments. Apart from the talk on EV changes, caramelised popcorn would continue to be taxed at 18%, while pre-packed and spiced popcorn would be charged at a 12% tax rate. Besides, unpacked and unlabelled popcorn would have a reduced slab of the tax of 5% applicable to it. All this is to clear up the nuisance regarding popcorn taxation.
Looking Towards the Future
As affected parties adjust to these changes, it will be interesting to see how this tax hike will influence consumer behaviours and business operations in the automotive sector. However, it has also deferred other important issues, such as potentially lower tax rates on insurance products and food delivery services through app-based platforms.
Ongoing discussions and future negotiations will be critical in determining how such contradictions between businesses and consumers on one side and policymakers on the other could take shape to create new regulations between such revenue-generation schemes through taxes and accelerated growth in the electric vehicle segment in India.
The recent action put forth by the GST Council to increase tax on used EVs has not been free of controversy as it appears to place the tensions between government policy intended to create the adoption of electric vehicles and the misgiving of the opposition parties that the policy used to defeat fairness by way of economic impacts. In this dynamic condition, policymakers must catch the tone of such adjustments in tax policy toward consumers and businesses to invite a better economy.
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