Pradeep Jain - Chartered Accountant

Query

() Posted On: 20 Aug, 2020

We are selling a second hand car which was purchased in VAT period. We have sold the same in June 2020. Whether the GST is to be paid on complete amount or on the margin only? Futher, the abatement will be available on the same. Whether benefit of both notifications will be available to us? Eloborate with an example.

Ans. This query is in reference to our Query No. 3 posted on 19th Aug 2020 as ?GST QUERIES #93/2020-21? regarding sale of used Motor Vehicle. We have received a lot of comments on this query and we are very thankful to our vigilant readers for the feedback of the same. We had mistakenly written that the abatement is @65%. We intend to apologize our vigilant readers for the inconvenience caused due to typo- graphical error. We really appreciate our readers for putting up the concern so that it could be rectified. So, in this note we intend to discuss the applicability of tax on sale of used Vehicle. We shall be discussing two important notifications issued with respect to sale of used vehicles. ? Notification No. 37/2017 ? Central Tax (Rate) dated 13.10.2017 It has been issued to provide for tax at 65% of central tax applicable on motor vehicles falling in tariff heading 87 under Notification No. 1/2017-Central Tax (Rate) dated, 28th June, 2017. The benefit under the above notification is admissible if the following conditions are satisfied:- 1. The supplier of Motor Vehicle is a registered person. 2. Such supplier had purchased the Motor Vehicle prior to 1st July, 2017 and has not availed input tax credit of central excise duty, Value Added Tax or any other taxes paid on such vehicles Also, the sunset clause of this notification has been kept as 1st July, 2020. In view of above discussion, it is clear that the benefit of paying tax only on 65% shall be available. ? Notification No. 8/2018 ? Central Tax (Rate) dated 25.01.2018 This notification intends to exempt and reduce the rate specified in notification No. 1/2017-Central Tax (Rate) applicable on the sale of used vehicles. We are presenting the rates period wise and vehicle wise below in a tabular form for ease of reference Category of vehicle (Based on notification no.01/2017 & 08/2018) ? CT (R) GST rate up to 25/01/2018 GST rate from 25/01/2018 Petrol Vehicles with more than 1200cc engine capacity & 4000mm length (HSN 8703) 28% 18% Diesel Vehicles with more than 1500cc engine capacity & 4000mm length (HSN 8703) 28% 18% SUVs (including utility vehicles) with more than 1500cc engine capacity (HSN 8703) 28% 18% Vehicles other than those mentioned above, including other vehicles under chapter 87 28%/18%/12%* 12% For the purposes of obtaining the benefit under this notification, the above two conditions specified in 37/2017-Central Tax (Rate) need to be satisfied. Explanation given in this notification determines the taxable value which shall be difference between the consideration received for supply of such goods and depreciated value of goods on the date of supply. If it is positive then it is to be taxed at the rates specified above in the table. If it is Negative then no tax is payable. Now, the moot question that arises here is whether the abatement of 35% shall also continue along with the benefit of margin scheme. Notification 37/2017 is issued under section 9(1) of the Act which explains levy and collection of CGST on intra state supplies. Notification number 8/2018 is issued under Section 11 of CGST Act, 2017 provides power to government for granting exemption from CGST on intra state supplies. 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. Now, we will explain the above query with the help of an example, Mr. X purchased a vehicle on 01.04.2012 that is pre-GST regime for Rs. 6,00,000/-. He wants to sell his vehicle for Rs. 1,20,000/-. And the WDV on date of supply is Rs. 1,00,000/-. Let us analyse the amount of tax considering two different dates for the supply of Vehicle a. Calculation of tax if supplied on 30th June 2020 Sale price = Rs. 1,20,000/- WDV as on 30.06.2020 = Rs. 1,00,000/- Margin as on 30.06.2020= Rs. 20,000/- Abatement @ 35% = Rs. 7000/- Taxable amount =Rs. 13000/- If the tax rate applicable on this car is 18%, the tax amount shall be derived as = 13,000*18/100 = 2,340/-

Comments

Query