Liability of service tax

[JOSHIL JAIN]

One of my client is authorised dealer of MUL. Dealership sells Preowned Car ( Second Hand Cars ). Dealership purchases these cars from customers and sells it to other cutomers. In this process it also deposit VAT also to the state govt. A/c. Maruti also charges Management fee and warranty fee for these cars as to certify it from MUL. Now please advise whether the profit earned on this sales and purchases made by dealership is liable for service tax or not.

[Surender Gupta]

From the query it appears that your client, not MUL, is the purchasing and selling of used cars in its own account (name). Therefore, this transaction is not liable under service tax.

AI Summary

Sale of goods: resale by authorised dealer of preowned cars is not subject to service tax where dealer trades on own account. The dealer purchases and sells used cars in its own name and account; therefore the receipts from those transactions constitute a sale of goods by the dealer and are not service income subject to service tax, notwithstanding VAT payments to the state and manufacturer charges for management or warranty certification.