MoRTH to kick off used vehicle dealer authorisation process

The Ministry of Road Transport and Highways (MoRTH), which, in December 2022, had executed an amendment to the Central Motor Vehicle Rules (CMVR), to regularise used vehicle dealers in the market by mandating them to get an authorisation certificate from their respective RTOs under whose jurisdiction their business lies, is set to kick off the process of implementing the new norms by virtue of an online sub-portal on Vahan on April 1.

While the Ministry’s recent guidelines are aimed at ensuring transparency in the used vehicle sale-and-purchase business, which remains a highly-fragmented and largely-unorganised sector in India, the move has been welcomed by the pre-owned car- and two-wheeler dealer fraternity, which also views this step as one that recognises the scores of used vehicle dealers operating at a small- and medium scale in India.

The new guidelines not just mandate a used vehicle dealer to get an authorisation certificate to be able to lawfully run the business, but also make the dealer accountable for a particular vehicle as its ‘deemed owner’ until it is in the dealer’s custody. The new regime will get updated documentation with the introduction of Form 29C – to be jointly signed by the seller and dealer - and uploaded on the government’s portal at the time of the vehicle’s handover to the dealer.

What the new mandate means

“Given that the seller is nowhere in possession of the vehicle, the responsibility of the legitimate usage of the vehicle as well as the accountability for any misuse will be that of the dealer, who has become the deemed owner of the said vehicle. The seller will be absolved once the two jointly sign and submit Form 29C on the Vahan portal,” explained Kamal Kishore Avutapalli, General Counsel, Cars24.

To limit usage of the vehicle under a dealer’s custody for potential customer test drives, or being in transit to get repaired or refurbished, the guidelines also require the dealer to maintain an electronic trip register of the vehicle online on the Vahan portal. “This is a huge relief for an individual selling his or her vehicle particularly to a small dealer, who would usually not offer any seller protection against any legalities unlike bigger players like Cars24,” Avutapalli added.

Questions around implementation

While the government’s latest move is set to act as an enabler to the accelerated transition in India’s pre-owned vehicle market, which is slated to double the number of its organised players with almost 40 percent of the used car market alone likely getting organised by 2027, there remain some unanswered questions pertaining to the implementation of the new guidelines.

“It is mandatory for a dealer applying for an authorisation certificate to have a GST number. However, in most states, a business is exempt from the GST regime if the annual turnover is less than Rs 20 lakh. In some other states, this threshold is set at Rs 40 lakh. Therefore, it remains to be seen whether the portal will allow an option for a willing dealer having a small-scale business to get registered,” Avutapalli pointed out.

He further cited concerns regarding the transfer of deemed ownership within the dealer fraternity, as vehicles in the stock of dealers, often change hands from one dealer to another, before finally meeting their end customers. “This is a huge gap for which we have written to the MoRTH, and while they have acknowledged this concern, we are hopeful that it will be resolved in the coming weeks,” Avutapalli said.

He also raised concern about the lack of clarity on the application requirements for bigger players of the likes of Cars24, which have operations in multiple states and cities. “We do not yet know how the mandate is going to get implemented – whether there is going to be a centralised registration system for larger players like Cars24 which have operations in multiple states - this is still an open question. We would prefer having a centralised registration process in the overall scheme of ease of doing business,” he added. The company says it has also written to the MoRTH to allow a seamless integration of its back-end system through an application programming interface (API) that will automatically upload trip details of its thousands of vehicles in real time on the government’s portal to ensure end-to-end compliance.

New guidelines a welcome move

Despite being aware that the implementation of the new guidelines is likely going to see some teething troubles for the initial period, the pre-owned vehicle industry is largely gung-ho about the rollout of these measures which are aimed to enhance the trust and transparency between a buyer and used-vehicle dealer.

“We welcome the new rules as for the first time, the industry of used car dealers has been granted recognition by the government. We expect that the market will become more organised as well. However, the new guidelines will not see all dealers switching to get an authorisation certificate overnight, the implementation will take some time.

“As soon as used vehicle dealers start seeing benefits of getting themselves registered with the government, they will automatically be pulled towards it despite the guidelines being mandatory. The authorisation certificate is not just going to be ornamental; it will significantly add value to a dealer’s business by acting as a stamp of authenticity,” Avutapalli signed off.

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