Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 5-5-2017 Last Replied Date:- 12-5-2017 – Present Indirect Taxation This sector basically comprises of Manufacturers, Automobile Dealers & Retailers. Presently, all of them are paying various indirect taxes such as: Excise Duty on manufacture/production of vehicles along with cesses, Service tax on services both as provider and also as receiver under reverse charge, Value added tax (VAT)/Central sales tax (CST) on Sale of Vehicle/ Spares/ Accessories; Central Cesses Taxation under GST Regime Taxable Person For GST, taxable person means a person who is registered or liable to be registered under section 22 or 24 of the CGST Act, 2017. Example If as an Automobile dealer has obtained separate registration for its administrative office, showroom and workshop in the same/different State(s), then in case of separate registrations such administrative office, showroom and workshop, shall be treated as distinct persons. Accor
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on cess if charged separately by the supplier. (Example: toll tax etc.) Amount paid by the recipient w.r.t. supply on behalf of supplier and not included in the price actually paid or payable (Example: Labour payment made by the recipient on behalf of supplier) Incidental Expenses such as employee insurance interest or late fee or penalty for delayed payment of any consideration for any supply (Example: Interest on delayed payments) Value of subsidies linked to supply excluding subsidies provided by the Central and State Governments However, value of supply shall exclude any discount that is given: (a) Before or At the time of the supply: Discount has been duly recorded in the invoice issued in respect of such supply, and (b) After the supply has been effected (i) Discount is established in terms of an agreement entered into at or before the time of such supply, and (ii) Specifically linked to relevant invoices, and (iii) Input tax credit has been reversed by the recipient of the suppl
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Automobile industries are a challenge which require redressal from your good office: Road Tax/ Life Tax – Currently, service tax or VAT is not paid on the Road Tax element. However, in the GST regime, value for the purpose of paying GST should also include Road Tax. Section 15 of the GST law clearly states that no taxes shall be allowed as reduction from the value except CGST, SGST/UTGST and IGST. Therefore, duplication of taxes to this extent will continue, as road tax is not being subsumed in GST. Road tax rates vary from State to State, are fairly high and ranges between 2% to 15%. This would unnecessary increase cost for the consumers. Reimbursement of Insurance, Registration etc. – In the GST Law, it is not stated whether GST is also required to be paid on the reimbursements. Automobile dealer collects various amounts from customers which are mere reimbursements and are paid back as it is to someone else. In other words, such amounts are collected merely as a pure agent, For examp
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o the condition that the same is shown in the invoice and is in the course of normal trade practice. The term normal trade practice is very subjective and especially in the automobile industry, the discounts vary depending upon the variants, new product launch, etc., and this may lead to valuation disputes. Post-supply Discounts- Generally, dealers receive various discounts from its manufacturers based on targets, vehicles lifted, Special Customers, Year-End Discounts etc. It is pertinent to note that post supply discounts will not be allowed as deduction from the value if the same is not linked to any invoice. Therefore, discounts policy needs to be reviewed and the same must be brought in line with the GST law to avoid tax on high values and litigation. Dealer Incentive Schemes – At present, dealer incentive schemes are not subject to VAT, but there are issues on applicability of service tax on dealers, depending on the terms of each scheme. The nature of such schemes is that these s
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made for the supply, unless the same is applied as consideration for the supply. There may be two views taken for advances for supply, i.e. Either it can be treated as payment received towards supply i.e. consideration for supply or; Can be treated as deposit . If second view is taken, the date of appropriation of the deposit towards a supply may be treated as the date of payment. This would also lead to ambiguity in interpretation as to what should be the date of such appropriation (like date of Vehicle Identification Number (VIN), date of registration of vehicle with the regional transport office etc.). This issue requires clarity. Vehicle Booking Advance- Currently token money received as advance towards booking of vehicle is not liable for VAT as the same is payable at the time of sale of vehicles. However, this practice of holding advances without payment of any taxes will be withdrawn in the GST regime and taxes will have to be paid on receipt of the booking advances also. Theref
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GST registration number is obtained for each such dealership, then transfer of any goods/ services between such dealerships will also be liable for GST. This will result in blocking of the working capital as the taxes needs to be paid from own funds and collection of taxes will be at a later date when such goods/ services are eventually sold. Tax on Second Hand Vehicles In GST, there may be additional tax burden on transactions in second-hand motor vehicles and exchange of vehicles. The proposed GST rules, issued by the Government will consider the market value of the new vehicle while calculating the tax burden. Thus, consumers may end up paying more as the discounted amount would be taxed. Under the new GST rules, retailers and traders dealing in used vehicles will come under taxation. While under the existing rules, second – hand products are outside the purview of tax and as such, sellers will have to pay taxes at the same rate as the new products. It may also increase the working
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ly of Goods and Supply of Services and accordingly taxed at the applicable rates or will it be treated as Composite/Mixed Supply on Case to case basis?? 2. Whether Provisions of Sec 140(3) shall cover already registered Automobile dealers who are also running their Service Workshop for servicing of Vehicle?? 3. Admissibility of Cenvat Credit on Demo vehicle i.e., Excise Element paid on Excise Bills, though such cars have been capitalized in books of Accounts of the Dealer. Thanks & Regards, – Reply By Pranay Jain – The Reply = Dear Sir, Thanks for sharing this, I am an automobile dealer, but there are few points which need to further discussed1. GST on road tax doesn't make sense, since it is not part of consideration value and it is imposed on complete invoice value including VAT or GST. So Road tax on GST and GST on road tax would be like circular reference sort of thing where both taxes are applicable on each other.2. Free Service Coupon reimbursement by manufacturer is made
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demo vehicle if it is being capitalized Road tax is not being subsumed in GST Free service coupons may taxed at redemption (Refer place of supply provisions in IGST) Pre-announced discounts or incentives may not be taxed. You may write to asandco@gmail.com or sanjivservicetax@gmail.com – Reply By abhishek ghai – The Reply = Respected Sir, Please clarify whether the following stands correct as in my opinion benefits of Sec 140(3) would be extended to already registered persons i.e., trader/Service Provider- 1. The opening line of the section says that – A registered person, who was not liable to be registered under the existing law , Section does not say- under any of the existing law. Can we not safely assume that currently traders are not liable to be registered under Excise? Hence even registered persons would get covered under the same, whether registered under Vat or Service Tax. 2. Section intends to pass benefit of central taxes i.e., Excise Duty on the goods which are part of t
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