GST IMPACT ON DEALER OF SECOND HAND VEHICLE

[NAMAN DOKANIA]

A dealer registered under gst purchases second hand vehicles and sale that after adding his margin in two ways described below:

1. Purchase seocnd hand vehicle in his own name and then sale that to customer

2. Purchases second hand vehicle and sale that without incorporating his name and just acts an intermediary and just earns the margin as income.

In these two cases please help me with the updated law on the taxability and whether can he take any itc on the improvements made in the car before selling it off in both thses cases??

[Shilpi Jain]

In case of intermediary, GST would be liable @ 18% on the margin.

In the other case, notification 8/2018-CT R will be applicable as per which GST will be liable only on the margin. ITC on vehicle not eligible.

Credit of the R&M would be eligible.

[KASTURI SETHI]

1. In case an Individual sells his old goods, no GST is applicable because it is not in the course of business or furtherance of business. .See CBIC's Press Release no.78/17 dated 13.7.17.

2. Intermediary cannot opt for marginal scheme.

3.Cost incurred on minor improvement (processing) can be added to the sale value under margin scheme.

4. A registered person who opts for margin scheme cannot purchase from outside the State. Notification No.10/17-CT (R) dated 28.6.17 refers. Once this scheme is opted, that person will have to work under this scheme for the whole financial year.

5. If ITC is taken, GST has to be paid on full value. Thus person will be out of margin scheme.

[Shilpi Jain]

Notification 10/2017-CT R is an exemption given to an unregistered supplier, supplying to a person who is taking benefit of paying GST on the margin scheme.

Also, 8/2018 notification restricts ITC only on the vehicle itself. It does not seem to restrict credit in respect of any other services, etc.

This notification shall not apply, if the supplier of such goods has availed input tax credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act, 2017, CENVAT as defined in CENVAT Credit Rules, 2004 or the input tax credit of Value Added Tax or any other taxes paid, on such goods.

[Shilpi Jain]

I am not able to find the provision which states that once margin scheme is opted for it has to be continued for the rest of the FY.

[Shilpi Jain]

Thank you Kasturi sir for highlighting the provision of notification 10/2017. Today I understand that there are some provisions in notifications which we have forgotten since these are not looked at frequently.

I was unaware of / forgotten this provision.

[KASTURI SETHI]

Madam Shilpi Jain,

With reference to your views at serial no.5 above, truly speaking I also learn a lot from your replies. GST laws are still in their infancy because of frequent changes/amendments/clarifications. All experts reinforce one another in this forum by way of posting replies to the queries. Thus the querist gets quality reply.

I always welcome divergent views on any issue because it is said that "dissent is decent".

[Shilpi Jain]

What I have noted is that the notification 10/2017 will not be applicable in the present case since it is an exemption from tax u/s 9(4), and presently there is no tax liable on the supplier under this provision in case of purchase from an unregistered person.

So even though the notification is effective but since the provisions have changed it is as good as not applicable.

AI Summary

GST on margin scheme taxable on dealer's margin; ITC on vehicle denied, R&M credit allowed. GST on second hand vehicle dealings depends on the dealer's role: where acting as intermediary, GST is leviable on the dealer's margin; where dealer buys and resells, the margin scheme applies so tax is charged on margin. Notifications limit input tax credit on the vehicle itself but permit credit for repairs and maintenance, and availing ITC on the vehicle may disqualify the dealer from the margin scheme and trigger tax on full value.