Insurance and Other Charges Collected on Sale of Vehicle

[Rajendra Prasad]

Dear Sir, Could you please clarify that

The following amounts are received at the time of sale of 2 wheeler vehicles are taxable or not.

1. Insurance Amount collected at the time of sale of 2 wheeler along with sale amount and given to insurance agent for purchase of insurance on the name of the buyer. No extra amount is calculated.

2. RTO Tax and Service Charges collected for registration of the vehicle and tranferred the amount to the RTO agent.

[Shilpi Jain]

Can exclude if it satisfies pure agent i.e. actual amount recovered, no title to good or service, etc as given in rule 33.

However, say any of these expenses is a pre-condition for the sale, i.e. without incurring this the sale cannot be made then such amounts would be considered as incidental expenses for sale and would have to be included in the transaction value.

[Ganeshan Kalyani]

RTO formality is generally done by the supplier of 2 wheeler vehicle and they also incur other expenses in the process of completing formality and hence I am of the view that such charges should form part of vale of supply.

AI Summary

Pure agent rule may exclude pass through insurance and registration fees unless they are incidental to the vehicle sale. Amounts collected for insurance and RTO registration at sale are excludable from taxable value if they qualify as pure agent pass through recoveries-actual amounts recovered with no title or beneficial ownership and otherwise meeting pure agent compliance. If such charges are preconditions for sale or are incurred and borne by the supplier as part of sale formalities, they are incidental expenses and must be included in the value of supply.