Sale of Used Car whether Tax to be calculated on Margin only for the Second Hand Goods Dealers not for others?

[Rajan Kumar and associates]

2026 (2) TMI 716 - AUTHORITY FOR ADVANCE RULING, TAMILNADU - In Re: M/s. Ponnusamy Thangaraj, Trade Name of Applicant M/s. Paranthaman Engineering Works. 

It is ruled that N. No. 08/2018 CT(R) only applicable for Dealers of Second Hand Goods... Is the advance ruling is correct... N. No. 08/2018 CT(R) clearly exempts the Tax in excess of the amount calculated as specified in the said notification... Nowhere is the Notification said it is only applicable to the Dealers of Second Hand Goods.

- Aivar

[Sadanand Bulbule]

Plz highlight why is this doubt?

[Rajan Kumar and associates]

Rule 32(5) of the CGST Rules (The General Margin Scheme): This rule states that GST is paid only on the profit margin for second-hand goods (like used phones, laptops, or jewelry etc.,). However, this specific rule is strictly restricted to taxpayers who are in the business of buying and selling second-hand goods. w.e.f. 01-07-2017

Notification No. 8/2018-CT (R) (The Motor Vehicle Exception): Introduced in January 2018, this notification acts as a special carve-out specifically for old and used motor vehicles. It allows any registered person (such as an IT firm, a manufacturing company, or a consulting agency) selling a used specified vehicles to pay GST only on the margin, rather than the full transaction value (provided ITC has to been availed)

As per My View - The Advance Ruling is Not Correct... Experts may share their view

[KASTURI SETHI]

The decision of  the Authority  for Advance Ruling, Tamil Nadu is correct. Rule and notification are to be read conjointly.  

[KASTURI SETHI]

There are so many decisions of various AARs wherein it has been held that the margin scheme is available to only those persons who are engaged in the business of buying and selling of second hand or old and used goods. A few are given below:-

 AAR Rajasthan --Shambhu Traders (P) Ltd. - 2019 (3) TMI 841 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN

AAR Maharashtra --Safset  Agencies (P) Ltd. - 2019 (6) TMI 822 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA

AAR Maharashtra  Astaguru Auction House P Ltd. - 2022 (3) TMI 572 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA

AAR Karnataka ---Aadhya Gold (P) Ltd. - 2021 (7) TMI 548 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA

[KASTURI SETHI]

Also see CBECs Press Release No.79/2017 dated 15.7.2017.

[Rajan Kumar and associates]

If that is correct... Whether I have to pay GST @ 40% for the sale of used Fortuner Car. I have already paid 40% at the time of Purchase which is happened 2 years back only... Practically why should I have to pay 40% Tax on Purchase & Sales both while I cant avail ITC...

These Advance Rulings leads to Cascading effect and moreover in the 55th GST Council meet, FM clearly said a Registered Person who sell his used car, has to pay tax only on the margin value as specified in the N. No. 08/2018 CT(R)...  https://www.youtube.com/watch?v=xsJnKVTCAo4 

Thats why, I thought the AAR is Incorrect...  My View N. No. 08/2018 CT(R) is applicable to All the Registered Person...

[KASTURI SETHI]

Rule will prevail over notification and NOT vice versa. 

[KASTURI SETHI]

Sh.Rajan Kumar Ji,

Pl. go through the legal meaning of the word, "Notification". Also go through the essence and scope of the word, "Notification". The role of a notification is "subordinate" to Acts and Rules. It "aids" the Acts and Rules.

Dissent is decent. It opens more avenues for discussion and enrichment of knowledge on the issue.

Thanks & regards.

[Rajan Kumar and associates]

Thank you sir...

My doubt is still I cant find any link between Rule 32(5) of the CGST Rules, 2017 & N. No. 08/2018 CT(R).... 

I can only find the link between Sec. 11 of the CGST Act, 2017, N. No. 01/2017 CT(R) & N. No. 08/2018 CT(R)

[KASTURI SETHI]

The burden to claim exemption or concession from duty is cast upon the person who claims exemption/concession. -----------Supreme Court in the case of CCE, New Delhi Vs. Hari Chand Shri Gopal 2010 (11) TMI 13 - Supreme Court.

Moreover, in this scenario, undoubtedly, the department would follow the decision of AARs.

Are ALL AARs incorrect ?

[Shilpi Jain]

Notification 8/2018 is not subject to rule 32(5). This is available even to a normal business (not necessarily only a second hand dealer) when they sell the notified cars/vehicles.

[KASTURI SETHI]

AAR, Tamil Nadu in the case of Ponnusamy Thangaraj  - 2026 (2) TMI 716 - AUTHORITY FOR ADVANCE RULING, TAMILNADU

 

AI Summary

Margin scheme for used vehicles: applicability disputed between second hand dealers and any registered seller of specified vehicles.
Whether GST on sale of a used motor vehicle is computed on the margin or on full consideration turns on whether the general margin valuation rule is limited to dealers in second hand goods or whether the motor vehicle notification independently allows any registered person selling specified used vehicles to pay tax on the margin; advance rulings generally restrict the margin method to those in the business of dealing in second hand goods, while some contend the notification grants a standalone concession to all registered sellers of notified vehicles.