Clouds of Uncertainty Loom Over Used Car Market After GST

GST, once a debatable topic, has now become a reality. This new tax regime has been a boon for the different industries, while others have severely affected by it. One such sector that is looming over the implementation of GST is the used car market.

The used car market in India accounts for 3.3 billion unit that is double the data released during 2011.  It was projected that this segment will witness a huge uptrend owing to the several factors like improved car quality, the emergence of organized player and growing societal acceptance for the used cars. But now, it seems the reverse is going to happen unless the cloud of uncertainty befalls.

How has GST affected the used car market?

8 years back, Big Boyz Toyz (a Gurugram based firm), the seller of premier used car, was enjoying an immense market share, but with the roll out of GST the tables were turned, as the new proposed structure kept the used car within the same ambit like a new car. It means the used car will be charged under the similar tax slab (28 percent to 53 percent).

Since, most of the models of Big Boyz Toyz come under the premium segment, so they have put their expansion plans on hold. Here’s what they have to say about it:-

“We were on the verge of opening stores in Mumbai and Hyderabad but have put the plans on hold as the new tax structure makes the business unviable,” said founder and managing director Jatin Ahuja.

The other formal players in the used car segment like Maruti Suzuki True Value, Tata Motors were unavailable to comment.

What effect will it have on the dealers?

The dealers earn 10 percent margin on the used car vehicle sales, and imposing a high tax structure could bump their sales. While, the new car sales will witness an average dip in prices, while SUV and other luxury cars would see a large drop in sales after GST.

“Even if used cars do not attract the 15% cess like the new ones, as has been agreed to by the Council, the business is still unviable.”

What effect will it have on the customers?

The customers will transit from organized car market to unorganized car outlets which don’t come under the GST umbrella.

These details make clear that either the business of used cars will be sidelined for a while or sales will drift to unorganized sector.