Gujarat Authority for Advance Ruling (‘AAR’) in the case of M/s Dishman Carbogen Amcis Private Limited “the applicant” has ruled that the value to be considered for sale of used motor vehicle would be the difference between Sale price and WDV on date of sale under Income Tax Act, 1961. Captioned ruling has been analyzed in this update.
A. FACTS OF THE CASE (relevant extracts)
- The applicant had purchased a new motor vehicle on 16th February 2018 for its business use.
- The applicant did not avail the GST Input Tax Credit on the said vehicle and instead capitalized the GST amount as well and claimed applicable depreciation under Income Tax Act, 1961.
- The applicant now wishes to sale the motor vehicle.
B. QUESTIONS BEFORE THE AAR (relevant extracts)
On what value, the new car purchase by the company is sold after using it for business purpose, shall the GST be charged? Whether the value of old and used car, sold by the company as mentioned above, can be taken as the value that represent margin of the supplier, on supply of such car, and whether the GST can be charged on such margin?
At what rate of GST, the new car purchase by the company is sold after using it for business purpose, shall the GST be charged?
C. CONTENTION OF THE APPLICANT
- That the ITC was not claimed at the time of purchases since it is blocked U/s 17(5) of CGST Act, 2017
D. RELEVANT LEGAL PROVISIONS REFERRED
E. OBSERVATION AND RULING BY THE AAR
- AAR noted that since ITC has not been availed on Motor Vehicle at the time of purchases, it would be covered under Notification 8/2018-ct(R) dated 25th January 2018 as applicable for old and used cars.
AAR finally ruled as under on the stated questions: - The Value for intended supply shall be the difference between the consideration received for supply of said car and the depreciated value of the said car on the date of supply as per Income Tax Act, 1961.
- GST rate leviable is 18% (9% CGST & 9% SGST).
F. Our comments
- In this ruling, AAR has specified the tax incidence on used vehicles as stated in Notification 8/2018 -CT (R) dated 25th January 2018. It states that the GST shall be discharged by seller on margin to be worked out on following basis:
- In case, depreciation under Income Tax Act is claimed, then sale value as reduced by written down value of asset on the date of sale. In case, this value is negative, then no GST would be charged.
- In other cases, sale value as reduced by purchase value of asset. In case, this value is negative, then no GST would be charged.
It needs to be noted that the above stated margin-based taxation would not be applicable if the supplier of such goods has availed ITC under GST regime or CENVAT/ VAT under pre-GST regime on such goods.
(Author can be reached at dinesh.singhal@snr.company or cadineshsinghal@gmail.com).
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Author Bio
Car purchased by a company in 2009 and WDV in 2023 Rs.59950/- Now Sold for Rs.60000/- to an individual person. Pl. explain if GST is applicable or not. If applicable, 18% gst rate is correct or not
If Dealer is Composition Dealer What is the effect in case of Sale Motor Vehicle
Dear Sir,
We have sold used car to one of our Employee under Own your Car scheme. The car, as usual, was also exclusively used by him, prior to the disposal.
Since, consideration received is significantly low as compared to WDV on the date of Sale, can the Department resort to the principle of Valuation Rules, since it is a Related Party Supply.
Can we argue that the sale is not for Furtherance of Business therefore is not a SUPPLY.
Best regards
Rajkumar Sinha
Member
Sir,
i had purchase a bike for business purpoase in financial year 2020-21 for rupees 80000. it’s wants to sale today for rupees 60000 and their Written down value is 55000. so, please tell me is to be charged gst on vehicle sale ? if to be charged then what rate to be charged on what such amount and how it will presentation in GSTR-1.
As per my knowledge , this rule is applicable only for dealer who involve in purchase and selling of uded vehicles. If any company sale it’s used car , margin rule is not applicable.
Kinldy reply me if I am wrong.
As per CGST notification CGST-R-8/2018 and IGST notification IGST-R-9/2018 dtd 25.01.2018, every registered person supplying following specified goods will be liable to pay GST on the value that represents margin of the supplier on supply of such goods. This notification is specifically in relation to used vehicles
Sir, i had purchase a bike for business purpoase in financial year 2020-21 for rupees 80000. it’s wants to sale today for rupees 60000 and their Written down value is 55000. so, please tell me is to be charged gst on vehicle sale ? if to be charged then what rate to be charged on what such amount and how it will presentation in GSTR-1.
pls Reply asap…..
what about the valuation rule, eg WDV is 1lac and sold for 1.2lac so sale value is 20K or we can consider 20K inclusive of tax and than pay tax on the same? my view is GST on 20k needs to be paid out of pocket