In re Toyota Mobility Solution and Services India Pvt. Ltd. (GST AAR Karnataka)
The Authority for Advance Ruling (AAR), Karnataka examined an application filed by a company engaged in the business of buying and selling used motor vehicles. The applicant purchases used passenger vehicles such as hatchbacks, sedans, SUVs, and similar categories, undertakes minor refurbishment and repairs, and subsequently sells the vehicles to end customers or transfers them to branches located in other States for sale. The company incurs various ancillary expenses in the course of its operations in addition to the purchase cost of used vehicles. These expenses include refurbishment charges such as painting, purchase of accessories, mechanical repairs, and interior cleaning, as well as marketing and advertisement expenses, professional fees, housekeeping, rent, office expenses, software subscriptions, manpower recruitment and staffing services, administrative overheads, and capital goods such as laptops, equipment, and furniture.
The applicant stated that GST is charged on these inward supplies when procured from registered suppliers, and in certain cases tax is paid under the reverse charge mechanism. According to the applicant, these expenses are incurred in the course or furtherance of business and are necessary for the effective functioning of the used car business.
The applicant sought an advance ruling on whether input tax credit (ITC) can be availed on goods and services other than the purchase of used vehicles when the company avails the benefit of Notification No. 08/2018-Central Tax (Rate) dated 25 January 2018, as amended. Under this notification, GST on the sale of used motor vehicles is payable on the margin between the selling price and purchase price, generally at the rate of 18%.
