GST on used cars

[Ethirajan Parthasarathy]

As per notification No.8/2018 Central Tax (rate )GST on used cars will be levied on margin.

The Margin has to be arrived at by deducting the WDV as on the date of supply from the consideration.

The income tax adopts Block system for allowing depreciation.

The WDV of The Block in which car being sold is clubbed, might have been wiped out, or brouht down substantially because sale value of any one asset included in the Block.

A question araises how to arrive at WDV of car being sold for purpose of GST.

Even otherwise, the income tax Act does not allow any proportioante Depreciation upto date on sale of any asset.

Any suggestion to solve above two issues.

[ANITA BHADRA]

Valuation of Old or Used car for GST Calculation

Value on which GST at 18% / 12 % ( as the case may be ) to be calculated shall be Margin of Supply which is to be calculated in the manner as mentioned in Notification No. 08/2018 which is given below:

1. In Case Depreciation under Income Tax Act Availed: Margin of supply shall be difference between Sale consideration and Written down Value and tax to be calculated on such Margin, and where the margin of such supply is negative, it shall be ignored.

2. In other cases: Margin of Supply shall be difference between sale price and purchase price Tax to be calculated on such Margin, and where the margin of such supply is negative, it shall be ignored;

[Ganeshan Kalyani]

The date of purchase of car can be found out from the books of accounts. The formula for depreciation which you are applying to a block of asset as per income tax need to be applied to a particular asset under sale. You will get the written down value of the car. Now you can apply the formula as per the notification no. 8/2018 CTR to arrive as the gst payable.

[Nash Industries I Pvt Ltd]

If the selling price is higher than the book value, GST is payable on the difference between the book value and the selling price.

If the selling price is less than the book value, GST is not payable.

Regards

S.Ramaswamy

[Ganeshan Kalyani]

Book value means written down value as per income tax act. In companies books of account the wdv will be as per companies act. Also note the wdv as per companies act is more than the wdv as per income tax.

AI Summary

GST on used cars margin scheme: tax applies to the margin between sale consideration and written down value. GST on used cars is imposed on the margin of supply: if depreciation under income tax was availed, margin = sale consideration minus written down value (WDV); if depreciation was not availed, margin = sale price minus purchase price. Tax is payable on a positive margin and negative margins are ignored. Determining vehicle-specific WDV may require extracting purchase date from accounting records and applying the depreciation formula to that individual asset, noting possible differences between accounting WDV and tax WDV.