Applicability of Notification 8 of 2018 - Composition Taxable Person

[Sooraj B]

Can a composition taxable person avail the benefit of Notification 8 of 2018 (CTR) in respect of sale of used vehicles. Under the Notification, exemption is given in the tax rate (tax in excess of 18% shall be exempt). So if a composition dealer (say a trader) sells a second hand vehicle, will he be liable to pay GST @ 1%or 18% on the margin amount?. If the notification is not applicable to a composition taxable person, I suppose he will be liable to pay GST @ 1% on the entire sales consideration.

[Sadanand Bulbule]

Refer the following Rule 32[5] of the CGST Rules in conjunction with the Notification No. 8/2018-CTR:

(5) Where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored:

Further there is no "composition benefit" available on margin scheme on buying & selling of second hand goods i.e., used goods under the above notification. So you have to pay the applicable rate of tax on the value arrived as provided under Rule 32[5].

[Ganeshan Kalyani]

In my view, the said notification is not applicable to you. You are to pay as per the rate applicable under composition scheme.

[Ganeshan Kalyani]

Sec.10(1) Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, [in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate] 19 as may be prescribed, but not exceeding...

[KASTURI SETHI]

Both schemes are independent of each other. Both cannot be intermingled You are not entitled to double benefits.

[Padmanathan KV]

Please consider the following propositions:

Notification No 8/2018-Central Tax (rate) reads as under:

G.S.R. 82 (E).- In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the central tax on intra-state supplies of goods, the description of which is specified in column (3) of the Table below, falling under the tariff item, sub-heading, heading or Chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), as are given in corresponding entry in column (2), from so much tax as specified in Schedule IV of Notification No. 1/2017 -Central Tax (Rate), as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4), of the said Table, on the value that represent margin of the supplier, on supply of such goods.

The above Notification "exempts" intra-state supplies of goods falling under the Table thereto, from the tax specified in Notification No.1/2017 as in excess of amount calculated at rate specified therein on the margin. (Therefore, one needs to calculate the tax as per Notification No.1/2017 and tax under this Notification and the difference thereof is exempted). In other words, the exmeption appears to be granted, not on the supply itself but only on the marginal tax.

Therefore, in this case, the rate of tax of 1% (0.5% + 0.5%) requires to be computed on the entire turnover, and not on the margin.

[YAGAY and SUN]

A composition taxable person cannot avail the benefit of Notification 8/2018 (the concession on GST rate for used vehicles based on margin). That concession is part of the “margin scheme” under Rule 32(5) CGST, but if you’re under the Composition Scheme, you’re simply not eligible to apply margin-based valuation. Instead, you must pay GST at the applicable composition rate on the entire sale consideration of the vehicle (not just the margin)

So when a composition dealer sells a second-hand vehicle, GST will be levied at 1% (or as per his slab) on the full transaction value, not 18% on the margin.

In short: Composition dealer selling a used vehicle ? GST @ composition rate on total sale amount.

[Sadanand Bulbule]

Dear experts

I humbly welcome your sagacious suggestions removing my doubts. Much obliged.

[Sooraj B]

Thank you so much dear experts for sharing your views 

AI Summary

Composition scheme ineligibility: composition dealers must pay GST at composition rate on full sale value of used vehicles.
Composition taxpayers cannot use the margin scheme under Notification 8 of 2018 for used vehicles; margin valuation (selling price minus purchase price where no input tax credit was availed) and the exemption tied to that margin are separate from the composition mechanism. A person on the composition scheme must pay tax at the applicable composition rate on the full sale consideration of the used vehicle rather than applying the margin based tax calculation.