Used Car Sale Without Input Tax Credit: GST Payable on Margin Between Sale Price and Depreciated Value at 18%

The AAR ruled on GST implications for a business-used car sold without input tax credit. For valuation, the taxable amount is the difference between sale price (55 lakhs) and depreciated value (47 lakhs) at time of supply. The applicable GST rate is 18% (9% CGST + 9% SGST) on this margin. The Authority clarified that the margin value representing the supplier's profit must be calculated exclusive of GST, based on the difference between consideration received and the car's depreciated value as determined under Income Tax Act Section 32.

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Issues:
1. Valuation of a new car sold after use in business for GST purposes.
2. Applicable GST rate on the sale of a used car used for business purposes.
3. Determination of the value representing the margin of the supplier for an old and used car sale.
4. Inclusion of GST in the margin value for the supply of old and used goods.

Issue 1 - Valuation of the new car sold after business use for GST: The applicant purchased a new car for business use without availing GST Input Tax Credit. The car was intended to be sold for Rs. 55 Lakhs, with a Written Down Value of Rs. 47 Lakhs at the time of sale. The Authority found the car to fall under a specific category of old and used motor vehicles as per Notification 8/2018-CT(R). The ruling stated that the value for the intended supply would be the difference between the consideration received and the depreciated value of the car on the date of supply, as per Section 32 of the Income Tax Act.

Issue 2 - Applicable GST rate on the sale of a used car: The Authority ruled that the GST rate leviable on the sale of the used car would be 18%, comprising of 9% CGST and 9% SGST. This determination was made based on the specific category the car fell under as per the relevant notification.

Issue 3 - Determination of the margin value for an old and used car sale: The Authority clarified that the value representing the margin of the supplier for the sale of the old and used car would be exclusive of GST. This valuation was to be calculated as the difference between the consideration received for the supply of the car and the depreciated value of the car on the date of supply, as per the provisions of the Income Tax Act.

Issue 4 - Inclusion of GST in the margin value for old and used goods: The ruling specified that the valuation, as per the Explanation (i) to the relevant notification, would not include GST in the margin value for the supply of old and used goods. This decision ensured that the margin calculation remained exclusive of any GST component.

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