Andhra Pradesh VAT on Used Cars sold to the employee

[Guest]

Sir,

Our Company is providing cars to certain Employees. Whenever the employee got transfer or resigned, he has to surrender the Car to the Company. In such case, the employee is purchasing the car from the Company at depreciated value. Whether Andhra Pradesh VAT is to be charged on that transaction?

Pleas also quote relevant Provision with respect to the reply.

[Ganeshan Kalyani]

In my view, yes.

[YAGAY andSUN]

Please go through the following

Carrying out Amendments to the Andhra Pradesh Value Added Tax Rules, 2005

G.O.Ms. No. 1614, Revenue (CT-II), dt. 31-08-2005

After sub-rule (3), the following shall be inserted namely,- “(3-a) Where any VAT dealer pays tax at the rate of twelve and half percent (12.5%) on the sale consideration of a used or a second hand vehicle already registered in the State under the Motor Vehicles Act, 1988, he shall be eligible for notional input tax credit at the rate of twelve and half percent (12.5%) on the purchase price actually paid supported by documentary evidence. Such notional input tax credit shall not exceed the output tax payable on the sale of used or second hand vehicle by the VAT dealer.”

[Guest]

Thank u Sir,

What is meant by notional ITC, whether that notional ITC can be used to pay the output Tax?

[YAGAY andSUN]

The notional amount (or notional principal amount or notional value) on a financial instrument is the nominal or face amount that is used to calculate payments made on that instrument. This amount generally does not change and is thus referred to as notional.

Yes, it can be adjusted with output liability.

[Nash Industries I Pvt Ltd]

Sale of the asset by the company to an employee and hence VAT is applicable.

[Guest]

Thank u Sir,

Whether we need to pay tax though we don't avail ITC at the time of Purchase of Car?

[Nash Industries I Pvt Ltd]

Yes tax is payable irrespective whether ITC is claimed or not.

Regards

S.Ramaswamy

[Guest]

What is the applicable VAT rate for used/second hand cars in Telangana/Andhra Pradesh. I could see that many states are taxing this at 5%, and some of my friends told that it is 5% even in Telangana/Andhra Pradesh, but not able to find out the source/notification. Can any of you please help ?

AI Summary

VAT on used company cars: sale to employees is taxable and notional input tax credit may offset output liability. Sale of a company-owned used motor vehicle to an employee is taxable under Andhra Pradesh VAT and attracts VAT even if input tax credit was not availed initially. The VAT Rules permit a notional input tax credit for dealers charging VAT on used vehicles, calculated on the actual purchase price with documentary support, adjustable against output tax but not exceeding the output tax payable on the sale.