ITC Reversal on sale of used commercial vehicle by Company

[NISHANT SHAH]

Company had bought Eicher tempo 4 years ago in AUG 20 and now it has to be sold to consumer who is unregistered person.

Company had claimed ITC 28% while purchasing this Eicher considering same as using for commercial purpose .

1. Now whether company is liable to reverse ITC proportionately since company has used same vehicle for 4 years. So whether company is liable to reverse ITC of 1 year as per Rule 43 ?

2. Whether company has to charge GST also on Sales Bill in case it is sold for less than WDV Price ? i.e., Book loss.

[NISHANT SHAH]

Please awaiting reply of respected experts if any one can answer.

[Vijay kumar]

Rule 43 will not apply here since it is not a case of using capital goods for taxable and exempt supplies. What applies is Section 18 (6) of the CGST Act' 17 r/w Rule 40 (2) of the CGST Rules' 17. Accordingly, you have to pay GST of - (i) 20% of ITC taken (since 4 years old) or (ii) 28% on the invoice value (which shall conform to sn. 15), whichever is higher. You have to pay GST even if it is sold below WDV price, as per the said provisions.

Sn.18(6) -- In case of supply of capital goods or plant and machinery, on which input tax credit has been taken, the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher:

Rule 40(2)-- The amount of credit in the case of supply of capital goods or plant and machinery, for the purposes of sub-section (6) of section 18, shall be calculated by reducing the input tax on the said goods at the rate of five percentage points for every quarter or part thereof from the date of the issue of the invoice for such goods.

[NISHANT SHAH]

Okay.. Is company require to pay GST @28% on Transaction Value if company decides to pay GST while raising tax invoice?

[Shilpi Jain]

Notification 8/2018 is the one which allows payment of GST on margin. In this case since you have claimed ITC at the time of purchase you will not be eligible to pay GST on the margin.

You will have to pay GST as per section 18(6) , which is higher of

a. 1 years's proportionate ITC, and

b. GST on sale value

[NISHANT SHAH]

Ok thank you mam.

[Pari]

Nice information 

AI Summary

ITC reversal on used capital goods: pay higher of residual ITC or tax on sale, margin scheme unavailable. Sale of a used commercial vehicle with ITC claimed requires ITC reversal under the capital-goods disposal mechanism: compute residual ITC by reducing claimed ITC by prescribed percentage points for every quarter or part thereof since invoice date, and pay the higher of that residual ITC or tax on the transaction value. GST is payable even if sale proceeds are below written down value, and margin-scheme payment is not available where ITC was taken.