SALES OF USED MOTOR VEHICLES ARE SUBJECT TO GST BASED ON THE
POSITIVE MARGIN, CALCULATED AS THE SALE CONSIDERATION MINUS THE DEPRECIATED
VALUE OF THE VEHICLE
Advance Ruling Authority
Name: Gujarat Authority for Advance Ruling
Date of Ruling: 01.06.2022 Ruling No.: GUJ/GAAR/R/2022/34
Name of Applicant: Dishman
Carbogen Amcis Limited
Summary of the Case: The
applicant, Dishman Carbogen Amcis Limited, purchased a new Sports Utility
Vehicle (SUV) in February 2018 for ₹80 lakhs. The SUV was acquired for business
purposes, and the company did not avail of the GST Input Tax Credit (ITC) at
the time of purchase, as it is restricted under Section 17(5) of the Central
Goods and Services Tax (CGST) Act, 2017. Depreciation was claimed under the
Income Tax Act, 1961.
The applicant now intends
to sell the used SUV for ₹55 lakhs (inclusive of all applicable taxes). The
Written Down Value (WDV) of the vehicle as per the books of accounts is ₹47
lakhs at the time of selling. The applicant sought an advance ruling to determine
the valuation and applicable GST rate for the sale of the used vehicle.
Relevant Sections:
1.
Section 17(5) of the CGST Act, 2017:
Pertains to blocked credits, where certain ITCs are not allowed, including
motor vehicles primarily used for business purposes.
2.
Notification 8/2018 CT(R) dated
25-01-2018: Deals with the valuation and GST rates applicable on the sale of
old and used motor vehicles.
3.
Section 32 of the Income Tax Act, 1961:
Relates to the depreciation of assets.
Facts of the Case:
·
Purchase and Usage:
The SUV purchased by Dishman Carbogen Amcis Limited had specifications
including an engine capacity exceeding 1500cc, length greater than 4000mm, and
ground clearance greater than 170mm. The vehicle was used for business purposes
without claiming ITC and depreciation was claimed under the Income Tax Act.
·
Sale Intention:
The company intends to sell the SUV after its usage for business purposes, and
the WDV of the vehicle is ₹47 lakhs. The applicant seeks clarity on the value
on which GST should be charged when the vehicle is sold, the applicable GST
rate, and whether the value representing the margin of the supplier on the sale
should be inclusive or exclusive of GST.
Questions Raised for
Advance Ruling:
1.
Valuation: On
what value should the GST be charged when the new car, purchased by the company
for business purposes, is sold after use?
2.
GST Rate:
At what rate should the GST be charged on the sale of the used car?
3.
Margin Consideration:
Whether the value representing the margin of the supplier on the supply of the
old and used car can be considered the value for GST purposes, and if so,
whether GST should be charged on this margin?
4.
Inclusive/Exclusive of GST:
Should the value representing the margin of the supplier on the sale of the old
and used car be inclusive or exclusive of GST?
Submission by Applicant:
The applicant provided
details of the car purchased, including its specifications and the fact that
ITC was not availed at the time of purchase. The applicant intends to sell the
vehicle and seeks to understand the correct valuation method, the applicable
GST rate, and whether GST should be charged on the margin between the sale
price and the depreciated value of the car.
Findings by Authority:
The Gujarat Authority for
Advance Ruling examined the details provided by the applicant and noted that
the vehicle in question falls under the category of old and used motor vehicles
with specific characteristics (engine capacity exceeding 1500 cc, length >
4000 mm, ground clearance > 170 mm) as defined in Notification 8/2018 CT(R)
dated 25-01-2018.
The notification states
that for registered persons who have claimed depreciation under Section 32 of
the Income Tax Act, the value representing the margin of the supplier shall be
the difference between the consideration received for the supply of the goods
and the depreciated value of the goods on the date of supply. If the margin is
negative, it shall be ignored.
Decision:
1.
Valuation:
The value for the intended supply shall be the difference between the
consideration received for the supply of the car and the depreciated value of
the car on the date of supply. The depreciated value is calculated as per
Section 32 of the Income Tax Act.
2.
GST Rate:
The applicable GST rate for the sale of the used car is 18%, which includes 9%
Central GST (CGST) and 9% State GST (SGST).
3.
Margin and Valuation:
The valuation for the sale of the old and used car is based on the margin as
per the explanation provided in Notification 8/2018 CT(R), and this margin is
exclusive of GST.
Conclusion: The
sale of the used car by Dishman Carbogen Amcis Limited should be valued based
on the difference between the selling price and the depreciated value of the
car as per the Income Tax Act. The GST at the rate of 18% (9% CGST and 9% SGST)
should be applied to this value, and the margin value is to be considered
exclusive of GST.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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