SALE OF OLD CAR

[KERAGODEGOPALARAO ANANTHARAO]

Dear sirs,

One of my client, who is dealer in textiles owning a car, now he sold the car and purchased a new car. Whether GST to be paid on car sold in August 2020.?

[Ganeshan Kalyani]

Yes, Sir GST is applicable on profit component.

[SHARAD ANADA]

Pl refer Notification 8/2018 CGST (Rate)

GST will be applicable on margin value

i.e. sale price - wdv as per Income Tax Act.

For eg sale price is 1.6 lakh and wdv as per Income Tax Act is 1 lakh than GST will be applicable on 60000/-

If sale price is 1.60 lakh and wdv as per Income Tax Act is 1.70 lakh than resultant margine is negative and GST will not be applicable.

Pl also refer other conditions in Notification

[Rajagopalan Ranganathan]

Sir,

In my opinion, he is not liable to pay GST for the reason that he is not engaged in the business of buying and selling old cars. Moreover, his turnover per annum will be less than 20 lakhs since it is the only occasion he is engaged in selling old car. .

[KASTURI SETHI]

When the car in question was purchased, all taxes were paid. Now why to pay tax again at the time of sale of the same car as second hand, especially in view of the fact that car had already suffered duty and VAT. If no credit was taken (presuming that it was for personal use), no GST is payable. If credit was taken, then tax is payable at depreciated value. If depreciated value is in the negative, then no GST.

[KERAGODEGOPALARAO ANANTHARAO]

My client is a registered dealer under GST, claimed the depreciation car in finding out taxable income under Income Tax Act for which I made above query. Now he is purchasing a new car, on which he paid GST which comes under blocked credit U/s 17(5)(a), correct sirs?

[KASTURI SETHI]

Dear KERAGODEGOPALARAO ANANTHARAO,

You are 100% correct. Further, for future, it is my humble request to you whenever you post your query , full and correct facts should be posted at the first instance. Thus the experts will not grope in the dark or in the imagination or presumption. It will save time and energy of querists and experts. I hope you will agree with me.

[Ganeshan Kalyani]

GST credit on car is block u/s17(5).

AI Summary

GST on margin: used-car disposals taxable where input credit taken, charged on sale minus written down value.
GST on sale of a used car depends on whether input tax credit was claimed; if no credit was taken, no GST; if credit was claimed, GST is payable on the margin (sale price minus written down value as per Income Tax Act) and no GST if the margin is negative. Occasional isolated disposals by a dealer may fall below the taxable threshold. Passenger motor car input credits are subject to the blocked-credit rule, affecting tax treatment on sale.