Used cars resellers: Exclusive: Used vehicle selling platforms like Cars24, Spinny, others fear new rules could puncture business

The amendments were notified in December to bring used-vehicle dealers under the regulatory ambit. The draft rules for used-vehicle dealers were originally issued in September last year following which stakeholders had submitted their views to the ministry, a source said adding that some of the concerns raised now were flagged earlier as well.

The rules, which would cover venture funded companies such as Spinny, Cars24, CarDekho, OLX Cars, among others , become applicable from April 1.

In a submission to the ministry of road transport and highways (MoRTH), IndiaTech, a lobby group representing tech companies, raised concerns over mandatory registration of second-hand vehicle dealers by showing GST registration.

“There are several used car dealers in India whose turnover is much below the prescribed threshold limit required under the GST laws, and hence will not have a GST registration,” IndiaTech wrote in its submission.

Speaking to ET, Cars24 general counsel Kamal K Avutapalli said that 70-80% of the smaller dealers fall below the cut-off for having a GST registration. “If the smaller dealers don’t get registration, we won’t be able to sell it to them. So, not only do these dealers get impacted, but me as a platform also gets impacted because my liquidity of valid dealers is going to get lost,” Avutapalli said.

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IndiaTech suggested that since the GST Act has prescribed threshold limits for registration purposes, the application form for grant or renewal of authorisation certificate for sale of registered vehicles should provide an option for dealers to either enter their GST registration number or declare that they are exempt from GST as per the GST laws. “An alternative authentication process may be considered here involving either PAN or a mandatory bank account,” it added.In another major concern over the issue, industry stakeholders have flagged the implementation of the new rules. “We have been speaking to some local RTOs (regional transport offices), and at the state level, there is no understanding yet as to how these new guidelines will be applicable. This has been true for RTOs in Delhi, Madhya Pradesh, Andhra Pradesh & Telangana, at least,” a top executive at a used-car sales unicorn told ET.

“The rule on having large dealers registered is also cumbersome given that there is no clarity on whether those with nationwide presence have to register themselves with local transport departments or if there will be one common registration,” the executive said, adding that stakeholders have sought clarifications from the government on these issues.

Further, the new rules have introduced the concept of deemed ownership, wherein the authorised dealer will be considered a deemed owner of the vehicle after submission of a form after taking the vehicle from the original owner.

This puts the liability of the vehicle including any incidents that happen upon the deemed owner. Industry has flagged that the rules do not consider the scenario of a dealer selling the vehicle to another dealer—a model that is deployed by auto-tech unicorns.

“In the absence of such a likely scenario, the first dealer who had purchased the vehicle will continue to remain as ‘deemed owner’ despite the vehicle being sold and handed over to another dealer under a B2B transaction,” IndiaTech wrote in its submissions.

Additionally, car dealers can only take cars out of their warehouse or parking yard for specific purposes, and every such trip has to be notified to the authorities through a form that is filled on the government’s online portal.

“Dealers like Cars24 who have pan India operations have inventory of thousands of cars. Manually feeding the trip details on the portal will be a time consuming exercise. We have requested MoRTH to provide API integration so that trip details of large dealers can be done on a batch-upload or real-time basis,” Avutapalli said, adding that industry stakeholders have sought time with road ministry officials to discuss these issues and seek clarifications.

The amendments were notified in December to bring used-vehicle dealers under the regulatory ambit. The draft rules for used-vehicle dealers were originally issued in September last year following which stakeholders had submitted their views to the ministry, a source said adding that some of the concerns raised now were flagged earlier as well.

The rules, which would cover venture funded companies such as Spinny, Cars24, CarDekho, OLX Cars, among others , become applicable from April 1.

In a submission to the ministry of road transport and highways (MoRTH), IndiaTech, a lobby group representing tech companies, raised concerns over mandatory registration of second-hand vehicle dealers by showing GST registration.

“There are several used car dealers in India whose turnover is much below the prescribed threshold limit required under the GST laws, and hence will not have a GST registration,” IndiaTech wrote in its submission.

Speaking to ET, Cars24 general counsel Kamal K Avutapalli said that 70-80% of the smaller dealers fall below the cut-off for having a GST registration. “If the smaller dealers don’t get registration, we won’t be able to sell it to them. So, not only do these dealers get impacted, but me as a platform also gets impacted because my liquidity of valid dealers is going to get lost,” Avutapalli said.

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IndiaTech suggested that since the GST Act has prescribed threshold limits for registration purposes, the application form for grant or renewal of authorisation certificate for sale of registered vehicles should provide an option for dealers to either enter their GST registration number or declare that they are exempt from GST as per the GST laws. “An alternative authentication process may be considered here involving either PAN or a mandatory bank account,” it added.In another major concern over the issue, industry stakeholders have flagged the implementation of the new rules. “We have been speaking to some local RTOs (regional transport offices), and at the state level, there is no understanding yet as to how these new guidelines will be applicable. This has been true for RTOs in Delhi, Madhya Pradesh, Andhra Pradesh & Telangana, at least,” a top executive at a used-car sales unicorn told ET.

“The rule on having large dealers registered is also cumbersome given that there is no clarity on whether those with nationwide presence have to register themselves with local transport departments or if there will be one common registration,” the executive said, adding that stakeholders have sought clarifications from the government on these issues.

Further, the new rules have introduced the concept of deemed ownership, wherein the authorised dealer will be considered a deemed owner of the vehicle after submission of a form after taking the vehicle from the original owner.

This puts the liability of the vehicle including any incidents that happen upon the deemed owner. Industry has flagged that the rules do not consider the scenario of a dealer selling the vehicle to another dealer—a model that is deployed by auto-tech unicorns.

“In the absence of such a likely scenario, the first dealer who had purchased the vehicle will continue to remain as ‘deemed owner’ despite the vehicle being sold and handed over to another dealer under a B2B transaction,” IndiaTech wrote in its submissions.

Additionally, car dealers can only take cars out of their warehouse or parking yard for specific purposes, and every such trip has to be notified to the authorities through a form that is filled on the government’s online portal.

“Dealers like Cars24 who have pan India operations have inventory of thousands of cars. Manually feeding the trip details on the portal will be a time consuming exercise. We have requested MoRTH to provide API integration so that trip details of large dealers can be done on a batch-upload or real-time basis,” Avutapalli said, adding that industry stakeholders have sought time with road ministry officials to discuss these issues and seek clarifications.