Service tax for old car sales by a authorised dealer

[Guest]

As a authorised dealer, we are buying and selling used cars business and accounting the same under trading The service tax department says that it will attract service tax since the said vehicles are not transferring in our name before selling to the ultimate customer as per RTO rules .  The State Govt. charges the VAT for the differences between purchases and sales.

Let me know whether service tax is applicable on this transaction.

Thanking you in advance.

V.Sathiyanarayanan

 

[Ramanujam Varadarajan]

In any case Trading activity (i.e. the activity of purchase and sale) is coming under Negative list under Service tax and thus not liable to service tax.   The transfer or non-transfer of car as per RTO provisions has no relevance for the purpose of applicability of VAT or non-applicability of service tax on a sale.

AI Summary

Trading activity exemption: sale of used cars treated as non-taxable service, RTO transfer irrelevant to service tax applicability. The core legal point is that pure purchase-and-sale trading in used cars by an authorised dealer is covered by the negative list exemption and does not attract service tax; the vehicle transfer requirement under RTO rules is irrelevant to service tax applicability, while State VAT on the margin is a distinct tax consequence.