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

AI Summary

Client Queries GST Rate and Cost Inclusions for Second-Hand Vehicle Sales Under Rule 32; Advised 12% Rate Application A client involved in trading second-hand commercial vehicles uses Rule 32 of GST Valuation Rules to calculate GST, focusing on the margin between sale and purchase prices. Expenses like repairs and tyres are added to the purchase cost. Initially, a 28% GST was applied, but Notification 8/2018 allows for a 12% rate. The client queries whether to adopt this new rate and if all costs, including RTO, tyres, insurance, and commission, should be added to the vehicle's purchase cost. The response advises applying the 12% GST rate and including all additional costs in the purchase price.