Vat on Sale of Company Vehicle

[Asked by Guest]

Dear Learned Members,

Ours is a partnership company engage in the manufacture of engineering goods which attract basic VAT at the rate of 5 percent & Excise Duty at the rate of 12 percent on all goods Sold. We have Company owned Cars purchased  about 5 Years back, used for the partners & employees of the company and are not a part of manufacturing. We didnot avail any input credit of VAT  during purchase. However did avail depriciation on the total purchase price, as per the rules while computing Income Tax.

Now We wish to Sell the same & buy New Vehicles. Please Advise (a) are we supposed to Charge VAT on sale? (b) if Yes  at what Rate? (c) If we Exchange the vehicle thru the dealer for new and pay the difference of price as payment and on payment of full tax on new vehicle, how would we treat the same?

Look forward the reply with supporting rules/case ref.

Thanks

AI Summary

Sale of company-owned vehicles may not form taxable turnover if not incidental to the primary business activity.
Whether proceeds from sale of company owned vehicles purchased for use and not held as stock in trade fall within taxable turnover depends on whether such disposals are "in connection with, or incidental or ancillary to" the principal business; mere receipt of sale proceeds or previous payment of tax at purchase does not alone convert disposals of used capital items into taxable trading activity, and strict construction of taxing statutes requires clear legislative language to include such sales within turnover.