ARA, Rajasthan has pronounced judgment on 27.8.2021, in the case of Tej Jain, Jaipur (2021) 36 J.K.Jain’s GST & VR 308, that;
‘Per Explanation (ii) to notfn No.8/2018-CT(R) dated 25.1.2018, in case of Old and used Refurbished Car, GST is to be levied on ‘Margin’, which shall be the difference between the Selling Price and the Purchase Price. ‘Purchase Price’ means only the amount paid by the applicant at the time of purchase of used Cars.
The amount incurred for the refurbishment of the Car are not includible in the Purchase Price in view of the clear language of the statute.
1. Background.─ The business model planned by the applicant involves firstly purchase of old and used cars mostly from the unregistered persons.
2. Findings by ARA.─ The issues that needs to be addressed is related to whether the amount paid to the owner of the car and amount incurred for the refurbishment of the said car are includible in the purchase price so as to deduct the same from the selling price of the old and used refurbished car arrive as the “Margin” for the purpose of valuation and levy undernotfn No.8/2018-CT(R) dated 25.1.2018.
3. Analysis by ARA.─ The Explanation (ii) to this notfn states that;
(ii) in any other case, the value that represents the margin of supplier shall be, the difference between the selling price and the purchase price and where such margin is negative, it shall be ignored.
Thus from the plain reading of the explanation (ii) to the aforesaid notfn it is observed that the explanation (ii) undoubtedly/clearly used the word “purchase cost” not the “purchase cost of goods”. It means only the amount paid by the applicant at the time of purchase of used cars can be considered as “purchase price”. There is no provision in the said notfn to include the cost of refurbishment in the purchase price.
4. Conclusion by ARA.─ Therefore, there is no reason to include cost of refurbishment in the purchase price for calculation of margin.
Further, it is settled jurisprudence principle that “when the words of a statute are clear, plain and unambiguous, i.e., they are reasonable susceptible to only one meaning, the courts are bound to give effect to that meaning irrespective of consequences. Moreover, if the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense”
5. Ruling by ARA.─As per explanation (ii), margin of supplier shall be the difference between the selling price and the purchase price.
As such, for the purpose of calculation of Margin and levy of GST thereon under notfn No.8/2018-CT(R) dated 25.1.2018, the component of purchase price will not include the amount incurred for the refurbishment of the said car & valuation figure will be worked out accordingly.
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Sir,
I could not understand this,
Can you elaborate in a simple way? with example if possible