Taxability on Sale of Old & Used Commercial Vehicle

[Kush Lodha]

Hi,

I have purchased a Mahindra Bolero Camper (Goods carrying vehicle having tonnage capacity less than 5MT) in the year 2013 (HSN Code - 87042190) and on which no ITC was availed. The WDV as on 01.04.2020 in the books is 147350 and i am selling it after using it for more than 5 years for ₹ 120000/-. I wanted to know what is the GST Tax liability on the sale of above vehicle, Whether to be taken on transaction value or not and what will be the GST tax rate and also what about compensation cess?

[Kush Lodha]

Moreover, i would like to add that the above vehicle is used for our own business for carrying our own materials (& not for hire) and shown as an business asset in the books. I am engaged in contractory business.

Thanks

[KASTURI SETHI]

GST is to be paid on transaction value. Sale of such old and used vehicle conform to definition of supply under Section 7 of CGST ACT. Here is an extract of FAQ dated 5.1.18.

"Q9. In transport industry, old vehicles, old tyres, scrap material etc, on which no Input Tax Credit (ITC) has been taken, are disposed of after completion of their useful life. As a truck owner disposing of these goods, am I required to pay GST considering that no ITC has been taken at the time of their initial purchases? Would levy of tax in such cases not amount to double taxation, as tax has already been paid at the time of initial purchases?

Ans. Under Section 7 of the CGST Act, 2017 supply includes all forms of supply of goods such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Sale or disposal of old vehicles, old tyres and scrap material for a consideration would therefore attract GST regardless of whether ITC has been availed or not."

Compensation cess is not leviable w.e.f. 25.1.18 vide Notification No. 1/2018-C.C. (Rate), dated 25-1-2018 amending original Notification no.1/2017-Compensation Cess (Rate) dated 28-06-2017.

For rate of tax see Notification No. 8/2018-C.T. (Rate), dated 25-1-2018.

[Kush Lodha]

Thanks Sir for your prompt response,

Just one confusion - In Q9 It begins as "In Transport Industry" and goes on like sale of old vehicle etc... Does it mean only for transport industries or to any one who is selling old vehicles? Like in our case we are not engaged in transport activities.

One confirmation is required - In Notification No. 08/2018 CT(R) in Sl. No. 4 - Rate for all other vehicles except mentioned above is 12% will be applicable for us.

[KASTURI SETHI]

It is just an example. It is applicable to you. Yes. GST Rate 12% (6%+6%) is applicable in your case.

[Himansu Sekhar]

Nice explanation sir

[KASTURI SETHI]

Sh. Himansu Sekhar Ji,

Thank you very much.

[Kush Lodha]

Thanks a lot KS Sir.. Appreciate your response and patience and way of explaining queries.

Another doubt and point crops up and i will be delightful if you will clarify my doubt on the same. I was going through the said Notification No. 08/2018-CT(R) in detail and before the table it says "rate specified on the value that represent margin of the supplier, on supply of such goods" and at the end of table under Explanation it explains about "Margin" which is reproduced below:-

Explanation –For the purposes of this notification, - (i) in case of a registered person who has claimed depreciation under section 32 of the Income-Tax Act,1961(43 of 1961) on the said goods, the value that represents the margin of the supplier shall be the difference between the consideration received for supply of such goods and the depreciated value of such goods on the date of supply, and where the margin of such supply is negative, it shall be ignored; and (ii) in any other case, the value that represents the margin of supplier shall be, the difference between the selling price and the purchase price and where such margin is negative, it shall be ignored.

In my case i have taken depreciation u/s. 32 and my margin of supply is negative but you have suggested to charge GST on transaction value, please clarify on this sir.

Thanks & Regards.

[KASTURI SETHI]

Sh.Kush Lodha Ji,

You have mentioned in the query dated 17.03.21 that you are selling it for ₹ 1,20,000/- . How is its margin value is negative ?

[Kush Lodha]

Sh. Kasturi Sethi Sir,

In my query dt. 17.03.2021 i have also said about the WDV of asset which is 147350. As per the notification margin of supply is difference between selling price and purchase price (if no depreciation is taken) and if depreciation is taken then it should be difference between selling price and WDV of fixed asset. It also suggests that if margin of supply is negative it is to be ignored but whether if to be ignored means transaction value to be taken as the taxable value. Also, suppose for example, say selling price is 160000 and WDV is 147350 then i have to pay taxes on the difference only i.e. ₹ 12650/- but here in my case i have to pay on total transaction value i.e. ₹ 120000/-. Please clear my doubt sir.

Thanks and Regards.

[KASTURI SETHI]

Sh.Kush Lodha Ji,

With reference to your above query, you are required to pay GST on ₹ 12650/-. Pl. do not read in isolation. Notification and Valuation Rules are to be read in conjunction.

[KASTURI SETHI]

FAQs are just guidelines. These are equal to Education Guide in Service Tax period.. FAQs have no statutory force. Valuation Rules are subject the Act. In this scenario, Definition of transaction value, definition of Supply, Valuation Rules and relevant Notification are to be read in conjunction to arrive at correct payment of GST.

[Kush Lodha]

Ok understood sir.. Thanks a lot Sh. Kasturi Sethi Ji.

[KASTURI SETHI]

Sh.Kush Lodha Ji, I was eagerly waiting for your response. A querist must be satisfied with the reply in letter and spirit of law. Difference of opinion may be there. Difference of opinion also enriches one's knowledge.

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi Sir. Further the WDV to be arrived following Income Tax depreciation rate. In books the depreciation rate followed in as per Company Law. So, one has to be careful to arrive at loss or profit on sale of used motor vehicle so to avail benefit of Notification 8/2018-CTR dated 25.01.2018.

[Kush Lodha]

Sh. Kasturi Sethi Ji,

I second your views sir, there might be difference of opinion and also that this difference always enriches our knowledge.

Thanks to Ganesh Sir also.

Thanks and Regards.

[ARVIND JAIN]

After reading all replies, Nutshell is that NO GST payable in the case Sale price is lesser than WDV and its payable only if your Sale price is greater than wdf i.e. on Difference positive amount. Please correct me if I have wrongly understood.

AI Summary

GST on Selling Used Business Vehicle: 12% on Margin Over WDV, No ITC Impact A user inquired about the GST liability on selling a used Mahindra Bolero Camper, which was a business asset with no input tax credit (ITC) availed. The discussion clarified that GST is applicable on the transaction value of used vehicles, regardless of ITC status, at a rate of 12%. If the vehicle's sale price exceeds its written down value (WDV), GST is payable on the margin. The forum emphasized understanding the applicable notifications and valuation rules, noting that no GST is due if the sale price is less than the WDV, as clarified through detailed responses and examples.