GST on Used Cars
By: – Akshay Hiregange
Goods and Services Tax – GST
Dated:- 23-1-2019<\/p>\n
Introduction:
\nSince one and half year from date of implementation of GST, there are several confusions regarding rate of tax applicable on sale of motor vehicles. In this article I would like to throw some light on changes on GST implications on sale of old\/used vehicles.
\nIn this article we would aim to cover:
\n * General Classification
\n * GST Rate changes (including abatement)
\n * Exemption from URD purchases
\n * Valuation
\n * Illustrations
\n * FAQs
\n * Upcoming\/related GST updates
\nGeneral Classification of Motor Vehicle:
\nHSN
\nDescription
\nSpecimen
\n8702
\nMotor vehicles for the transport of ten or more persons, including the driver
\nPassenger Bus, Tempo travellers
\n8703
\nMotor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 8702
\nDiesel and Petrol Cars, Electric cars, Ambulance, Three wheeled motor vehicles
\n8704
\nMoto<\/p>\n
= = = = = = = =<\/p>\n
Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n r 87, which have varied rates. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n bove. [Added as per notification no.5\/2017 Compensation cess (rate)] = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n conditions, a registered person who is dealing in second hand sale of motor vehicle (which is falling under chapter 87) could claim the abatement of 35% of value of taxable supplies and pay GST on only 65% of value of supply of such motor vehicle. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n through Illustrations: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n can avail the benefit of 08\/2018 CT(R) and 1\/2018 CC(R) the computation as per below. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n y the supplier.” = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" GST on Used CarsBy: – Akshay HiregangeGoods and Services Tax – GSTDated:- 23-1-2019 Introduction: Since one and half year from date of implementation of GST, there are several confusions regarding rate of tax applicable on sale of motor vehicles. In this article I would like to throw some light on changes on GST implications on … Continue reading “GST on Used Cars”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-16290","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/16290","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16290"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/16290\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16290"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16290"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16290"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
For full text:-Visit the Source <\/a><\/p>\n
\nThis would provide relief to the persons dealing in the buying and selling of motor vehicles. Although, it would also help reduce the impact for a registered person who is selling the motor vehicle being a fixed asset.
\nConditions for claiming such rates & exemptions:
\n * Where depreciation claimed under Income tax, margin shall be calculated as consideration received (-) depreciated value of goods as on date of supply. Here, it is important to note, that although Income Tax required depreciation to be calculated on the asset block, the rate is required to be applied for the specific motor vehicle, upto the date the supply.
\n * The credits under GST or erstwhile laws have not been claimed. (GST, VAT, ED, ST)
\nChanges of GST Cess rate over a period of time
\nIn case of motor vehicles even the rate of GST compensation cess has undergone many changes from initial compensation cess notification no. 01\/2017- Compensation cess (Rate) vide notification no. 05\/20<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nNIL
\n15%
\nNIL
\nAll other rates in notification 01\/2017 remain same – GENERAL
\n4
\nPetrol, Liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven motor vehicles of engine capacity not exceeding 1200cc and of length not exceeding 4000 mm.
\n1%
\n1%
\nNIL
\nPetrol Vehicles with said parameters
\n5
\nDiesel driven motor vehicles of engine capacity not exceeding 1500 cc and of length not exceeding 4000 mm.
\n3%
\n3%
\nNIL
\nDiesel Vehicles with said parameters
\nSerial no. 52 in 01\/2017 is substituted for below (only 8703):
\n6
\nFor other than above vehicles engine capacity not exceeding 1500cc
\n15%
\n17%
\nNIL
\nGenerally, Petrol vehicles between 1200 – 1500 cc
\n7
\nVehicles exceeding 1500cc known as SUVs.
\n\tExplanation of SUVs – Includes a motor vehicle of length exceeding 4000mm and having ground clearance of 170 mm. and above.
\n15%
\n22%
\nNIL
\nIf declared as SUV, also need to check ground clearance
\n8
\nFor other than ab<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nNote: This notification would become redundant (for other than leasing entity), due to notification 8\/2018 Central Tax (Rate) & 1\/2018 Compensation Cess (Rate).
\nExemption notification for purchase of old and used cars:
\nIn terms of Notification no. 10\/2017 – Central Tax (Rate) & 4\/2017 Compensation cess (Rate) dated 01\/07\/2017, exempts intra state purchase of second-hand goods from an unregistered person (sec 9(4) of CGST Act) by a registered person, dealing in buying and selling of second-hand goods as per section 32(5) of CGST Act 2017.
\nComments:
\n * As per the above notification the exemption benefit can be availed by the dealer (who are into buying and selling of second-hand goods) when motor vehicle is purchased from the unregistered<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nMr. Pradeep (car dealer) is into the buying and selling of old and used cars situated in Karnataka. He purchased a petrol car which is having engine capacity 1498cc and 3998mm on 02\/07\/2017 for a price of ₹ 4, 00,000 from an unregistered person who is also located in the same state. After minor changes\/additions to the car, Pradeep sold the car for ₹ 6, 00,000.
\nSale value
\n6,00,000
\nPurchase value
\n4,00,000
\nMargin
\n2,00,000
\nScenario 1: Sale of old and used car on or before 12\/10\/2017:
\nIn terms of Rule 32(5) of CGST Rules 2017, GST is to be paid on the Margin i.e. ₹ 2,00,000 + GST at the rate of 45% (i.e. 28% +17%) which amounts to ₹ 90,000 (Rs. 2,00,000*45%).
\nScenario 2: Sale of old and used car after 13\/10\/2017:
\nIn this scenario the assessee has an option to avail the benefit of notification no.37\/2017 CT(R) & 38\/2017 IT(R) provides an abatement of 35% of taxes, computation is as follows:
\nSl. no.
\nParticulars
\nAmount
\n *
\nTaxable<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nThe above notification renders Rule 32(5) and notification no.37\/2017 (condition 2) redundant in such scenario.
\nSI.No.
\nParticulars
\nAmount
\nA
\nMargin
\n2,00,000
\nB
\nCGST (A*9%)
\n18,000
\nC
\nSGST (A*9%)
\n18,000
\nD
\nCess
\nNIL
\nTotal tax liability
\n36,000
\nThe liability has significantly reduced from ₹ 90,000 to ₹ 36,000 from the time when GST was implemented to January 2018.
\nFAQ's related to supply of old and used cars:
\n * Whether GST liability on margin can be discharged inclusive basis i.e. margin inclusive of GST?
\nNo, in terms of Rule 32(5) of CGST Rules, GST needs to be charged on margin (i.e. sale price – purchase price).
\n\tWhether services provided by the second-hand car dealer could be considered as intermediary service?
\n * In terms of Section 2(13) of IGST Act, “Intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the s<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n * Accordingly, TCS collected should be included in the taxable value.
\n * Hon'ble Kerala High Court in the case of SN Automobiles Private Limited vs. UOI & CBIC has stayed the imposition of GST on TCS collected.
\n * It is important to note Circulars issued by the department are not binding the assessee, but are binding on the department.
\n\tWhether dealers can avail the ITC on old and used cars purchased from the registered tax payers?
\n * Generally, car dealers work based on margin earned on sale, therefore, they would opt for concessional tax rates and valuation as provided under notification no. 08\/2018 CT(R) and similar notifications.
\n * If the dealers are not availing any exemption through the notifications, he would require to discharge GST on entire sale value at full tax rate, wherein he can avail the ITC on purchase of old and used car.
\n\tWhether a car dealer can avail the concessional rate benefit for demo cars?
\n The Demo car is used for the purpose of tes<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n