Rate of VAT on used vehicle

[vikas gupta]

Dear Sir

I own a vehicle in my name which is 5 year old. This vehicle is in the books of the company since 5 years and the company is availing the depriciation every year.

today if i sell my vehicle is there any vat payalbe to the govt or not if yes, what is the vat payable to the govt ? 

[YAGAY andSUN]

In the  PANACEA BIOTECH LTD. Versus COMMISSIONER OF TRADE AND TAXES & ORS.2012 (12) TMI 826 - DELHI HIGH COURT,  it was held that The selling of used cars cannot by any stretch of the imagination be characterized as "ancillary" or incidental to the business of a pharmaceutical company. It is not shown that the cars were of a special character e.g. air conditioned vehicles especially designed to store and ferry pharmacy products. They were purchased for use of company employees and executives, for office purposes. At the stage of purchase, they suffered sales tax, which the assessee, as buyer, was bound to pay. However, the assessee never held them for the purpose of sale and purchase, but for using them. After, their use, having regard to lapse of time, and their wear and tear, the assessee decided to replace them, thus sold them. Their sales, in a sense are twice removed from the business of the assessee. They cannot be called "incidental" or "ancillary" to the manufacture and sale of pharmaceutical products, which the assesse is engaged in. The vehicles had already been taxed once under the first point tax regime then in cases of transactions which are redundant and cannot be considered under the definition of "business" as they were aimed mainly to get rid of old vehicles which are carried on by persons in normal course of their lives as well and previous orders of the Appellate Tribunal have also been in favour of the petitioner itself, the levy of sales tax on an already taxed vehicle with little relation to the business will give rise to an anomaly - thus the view taken regarding inclusion of the sales transaction of the cars in question, in the turnover of the petitioner is unsustainable in law - writ petition allowed.

[Ramanujam Varadarajan]

The position under VAT scenario would require to be examined. 

-  There is no single point/first point taxation concept under VAT.  VAT is a multi-point levy, with a right to avail Input tax credit subject to conditions.

- VAT laws of various States specifically covers every transfer of property in old, obsolete goods, whether in the course of business or not, within the definition of 'Sale' for the purpose of levy of VAT.

Thus, the decision of Delhi High Court should be considered taking the above factors into mind.

[sanjeev bajaj]

I suppose mr. Vikas Gupta is in Delhi and talking about DVAT.

 

Now, the question is Whether  Car held by the company falls under the definition of capital Goods or not as the same is being used by the emploee.

In my opinion, looking after the delhi high court judgement it is not capital goods although capital asset, hence no vat should be imposed

 

 

[Ramanujam Varadarajan]

I still would like to re-clarify and re-confirm that the Delhi High Court decision referred cannot be relied universally for not charging VAT on sale of office assets.  The facts and position considered in the decision should be seen viz. whether it is rendered in the context of VAT provisions / after taking into consideration of definition of Sale under DVAT provisions etc.

DVAT provision contain a specific clause every disposal of goods whether in the course of business or not would be considered as sale.

 

[deepak gulati]

I also agree with Mr.  Ramanujam, The Delhi Hight court judgment pertains to the period when Goods were taxed at First point and in VAT there is no concept like this. In DVAT it will be taxable at rate prescribed for vehicles.

[RAJPAL SINGH]

SIR

I AM IN UTTAR PRADESH I OWN A CAR IN MY NAME 6 YEAR OLD . THIS CAR IS IN THE BOOKS OF THE FIRMS SINCE 6 YEAR AND FIRMS IS AVAILING THE DEPRICIATION EVERY YEAR

TODAY IF I SELL ME CAR IS THE ANY VAT APYABLE TO THE UP GOVT WHAT IS THE VAT PAYABLE TO THE GOVT WHEN I PURCHASE CAR ITC NOT AVAIL

AI Summary

VAT liability on sale of used company vehicle hinges on statutory definition of sale and treatment as capital goods. Whether sale of a company-owned, depreciated vehicle attracts VAT depends on the VAT regime and statutory definitions rather than prior sales-taxation history. Under VAT, many State laws treat every disposal of goods, whether in the course of business or not, as a sale for levy purposes. Parties must assess whether the vehicle is a capital good or capital asset, the statutory definition of sale in the applicable VAT law, and whether prior taxation or the vehicle's purpose affects VAT liability; the Delhi High Court reasoning cannot be taken as universally determinative under VAT without examining those provisions and facts.