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.

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.