Sale of used cars is not subject to VAT under Delhi Value Added Tax Act, 2004
Anand Decors and Others (the Appellants) were manufacturing certain commodities and were registered dealers under the Delhi Value Added Tax Act, 2004 (DVAT Act).The Appellants purchased motor vehicles/cars,paid Sales tax/ VAT but did not avail input tax credit thereon under DVAT Act. The Appellants were not dealers or traders in motor vehicles.
The Department alleged that the resale of the used motor vehicle to third parties should be added or included in the taxable turnover and thus exigible to VAT. The Appellate Tribunal, Value Added Tax, Delhi upheld the contentions of the Department and held that the sale of motor cars or other capital assets are not exempt under Section 6(3) of the DVAT Act, and should be included in the taxable or business turnover of the Appellants. Being aggrieved, the Appellants preferred an appeal before the Hon’ble High Court of Delhi.
The Hon’ble High Court of Delhi held as under:
a) There should be a sale of Capital goods;
b) The said Capital goods should have been used by the dealer from the time of purchase till sale;
c) The purpose for which the Capital goods were used should be for making sale of taxable goods or taxable goods and non-taxable goods. The Capital goods should not be exclusively used for making sale of non-taxable goods;
d) The dealer should not have taken tax credit in respect of such capital goods under Section 9 of DVAT Act.
Hence, the Hon’ble High Court of Delhi allowed the appeal in favour of the Appellants and held that sale of used cars is not subject to VAT provided that four conditions stipulated in Section 6(3) of the DVAT Act for availing exemption under DVAT are duly met.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: firstname.lastname@example.org)