GST UPDATE ON SALE OF OLD & USED MOTOR VEHICLES

GST UPDATE ON SALE OF OLD & USED MOTOR VEHICLES

In our last update related to sale of old & used motor vehicles, we had opined to avail both the exemption and abatement on sale of old & used resulting in reducing liability to 11.7% (65% of 18) and 7.8% (65% of 12). On this opinion, we have received queries regarding availment of both exemption and abatement on sale of old and used motor vehicles. Accordingly the issue was that both exemption notification (37/2017 dated 22.08.2017 and 8/2018 dated 25.01.2018) provides exemption on fulfillment of certain conditions and do not reduce or amend the GST Rates as such as provided in notification 1/2017 dated 28.06.2017 which simply means that normal rate on motor vehicles as provided in notification no. 1/2017 still valid. Thus, registered person has an option to apply either of the exemption notification 37/2017 or 8/2018 on meeting the conditions therein.

With reference to the query raised clarifications on this part has been made which explains that why benefit of both the notifications can be availed and is as following:

Abatement of 65% on sale of Motor vehicle vide notification no. 37/2017 – Central tax (rate) dated 13.10.2017

Section 9 of CGST Act, 2017 explains levy and collection of CGST on intra state supplies. Section 9(1) of the Act explaining levy of GST is been reproduced as under:

9(1): Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.

Thus, notification no. 1/2017- Central tax (rate) dated 28.06.2017 was issued by the Government under section 9(1) of the CGST Act notifying the rates to be levied under different tariff. Hence, it will be tariff notification and not exemption notification.

Now notification no. 37/2017 – Central tax (rate) dated 13.10.2017 has also been issued under section 9(1) notifying sale of vehicles purchased and leased prior to 01.07.2017 will attract GST at a rate equal to 65% of the applicable GST rate (including compensation cess). This abatement was provided along with the condition that sale of such vehicles is done by a registered person who has procured the vehicle prior to 01.07.2017 and has also not availed any input tax credits of central excise duty, VAT or any other taxes paid on such motor vehicles.

Exemption on sale of Motor vehicles vide notification no. 08/2018 – Central tax (rate) dated 25.01.2018

Section 11 of CGST Act, 2017 provides power to government for granting exemption from CGST on intra state supplies. Section 11(1) of the Act providing exemption from CGST is been reproduced as under:

11. (1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.

Government on 25.01.2018 issued a notification no. 08/2018- Central tax (rate) which reduced the rates of sale of old and used cars under section 11(1) of the Act applicable on all the types of 2^nd hand motor vehicles on the margin of the supplier of such goods, read along with the condition that no input tax credit of input tax credit as defined in central excise duty or value added tax (VAT) or GST paid on such vehicles has been availed by the supplier.

Thus, accordingly, both the notifications are issued under different sections of the Act i.e. section 9 which prescribes tariff rates while section 11 grants exemption. Thus, both are not exemption notification. Therefore, benefits of both the notification can be availed which further reduces liability to 11.7% (65% of 18) and 7.8% (65% of 12).

The content of this GST update is for educational purpose only and not intended for solicitation.

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GST UPDATE ON SALE OF OLD & USED MOTOR VEHICLES

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