GST Update on GST Implications On Sale Of Motor Vehicle

A new concept regarding taxability on sale of business assets has been introduced in the GST regime. According to entry no. 1 of Schedule-I of the CGST Act, 2017, permanent transfer or disposal of business assets where input tax credit has been taken is to be treated as supply even if made without consideration. Moreover, reference is also made to the provisions of Schedule II of the CGST Act, 2017 which prescribes the activities to be treated as supply of goods or supply of services. Clause 4 of this schedule reads as follows:-
"4. Transfer of business assets

(a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person;

(b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services;

(c) where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless—

(i) the business is transferred as a going concern to another person; or

(ii) the business is carried on by a personal representative who is deemed to be a taxable person."
The clause 4(a) of the Schedule II covers the transfer of business assets. It states that the transfer or disposal of assets should be treated as supply if the following conditions are satisfied:-
• There should be goods that form part of business assets.
• The said goods are transferred or disposed of, so that the same will no longer form part of those assets.
• The disposal should be by the businessman or on his direction.
• The disposal may be with our without consideration.

The analysis of clause 1 of Schedule I and clause 4(a) of Schedule II brings out the following:-

Schedule 1 will be applicable where there is permanent transfer of the business assets. However, schedule II covers the situation only if a part of business assets is disposed of. This is suggested by the language of the clause which states that " where goods forming part of the assets of a business". This shows that where even one or few goods out of total assets of a business are disposed of, this clause will apply. On the other hand, if all the business assets are permanently transferred, schedule I will be applicable. This implies that where a single asset is transferred, it will be treated as supply whether or not credit was taken on the same. Going by this analogy, if a motor vehicle is being sold on which no credit was taken, then too, the said motor vehicle will attract the levy of GST because sale of business assets whether with or without consideration is deemed as supply of goods. Therefore, sale of used motor vehicle will be leviable to GST.

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GST Update on GST Implications On Sale Of Motor Vehicle

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