Second hand Commercial Vehicle Trading -Margin Scheme

[SIDDHARTH KOTHARI]

One of our client is in trading of Second hand Commercial Vehicle. He has adopted the Rule 32 of GST Valuation Rules for the purpose of GST. Following Observations found :

As per Rule 32 , no where the Purchase price and Selling price are defined. The words used as margin between Sale Price and Purchase Price.

So all expenses incurrred for particular vehicle are added to the purchase cost of vehicle and from sale price the amount is deducted.

The practice adopted by client:

Purchase of Dumpur HSN 8704: 500000(No credit claimed as we are in margin method)

Repairing : 90000

Tyre: 20000(Credit of 28% to be claimed-4375)

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Cost: 610000

Sold 650000

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Margin 40000( inclusive of GST 28% i.e 8750)

Net GST Payable was 8750-4375 =4375

Reason for taking 28% is due to claiming credit of tyres and insurance.

Now due to notification 8/2018 , calculation can be changed as follows:

Purchase of Dumpur HSN 8704: 500000(No credit claimed as we are in margin method)

Repairing : 90000

Tyre: 25600( Total cost inclusive of GST)

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Cost: 615600

Sold 650000

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Margin 34400

Now if apply the notification 8/2018 the rate would be 12% .

Is it advisable to apply 8/2018 and not claiming any credits and pay 12% ? Should be add all cost like RTO , Tyres , Insurance , Commission etc to the cost of vehicle as purchase cost?

Thanks and Regards

[Rajagopalan Ranganathan]

Sir,

You can pay gst @12% as per Notification No. 8/2018 -C.T. (Rate) dated 25.01.2018. All costs like RTO , Tyres , Insurance , Commission etc are to be added to the purchase price only. It will constitute the purchase price.

AI Summary

Margin scheme for second-hand vehicles: apply the notified concessional rate and add all ancillary costs to purchase price. The margin scheme under Rule 32 taxes resale of second hand commercial vehicles on the margin between sale and aggregated purchase cost; repairs, tyres, insurance, RTO charges, and commission are to be added to purchase price. A later notification allows applying a concessional rate under the margin method where input tax credits are not claimed, so a dealer may opt for the concessional rate and refrain from claiming credits while treating ancillary costs as part of purchase price.