There were lot of confusion and questions about the sale of car, whether the transaction will be taxable or not under GST. There will be different cases for this transaction, we shall discuss only sale of car by registered person under GST on which no Input Tax Credit has been claimed under earlier law.
As per section 7(1) of CGST Act,2017, “supply” includes
- all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
- import of services for a consideration whether or not in the course or furtherance of business;
- the activities specified in Schedule I, made or agreed to be made without a consideration;
- the activities to be treated as supply of goods or supply of services as referred to in Schedule II
As per Schedule II, serial no. 4 i.e. Transfer of Business Assets, sale of car by registered person, which forms part of business will be considered as supply under GST and will be taxable at applicable taxes and cess.
Calculation of Total GST Payable:-
On 25th January, 2018, CBEC issued the notification for revision of rates and method for calculation of GST.
As per Notification no. 8/2018-Central Tax (Rate) dated 25thJanuary 2018; GST Rate will be 18% for Motor cars (HSN Code- 8703) on the value that shall be the difference between the consideration received for supply of such goods and the depreciated value (As per Income Tax) of such goods on the date of supply, and where the margin of such supply is negative, it shall be ignored.
As per Notification no. 1/2018-Compensation Cess (Rate) dated 25th January 2018; GST Rate will be NIL for Motor cars (HSN Code- 87) if the supplier of such goods has not availed the input tax credit.
For Example: – XYZ Pvt. Ltd. registered under GST has sold his car for Rs. 1,25,000/- and its Written Down Value as on date is Rs.1,00,000/-
|Written Down Value||1,00,000|
|Total Invoice Value||1,29,500|
- If the margin of such supply is negative then it shall be ignored
- In any other case, the value that represents the margin of supplier shall be, the difference between the selling price and the purchase price and where such margin is negative, it shall be ignored.
- This notification shall not apply, if the supplier of such goods has availed input tax credit.
- For Individual or Unregistered person selling his private car will not be taxable under GST.
- For second-hand goods dealers the transaction will be taxable and will pay GST on the margin.
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(This article is authored by Waquar Ansari exclusively for publication at StartUp Movers. No content of this article can be published elsewhere without prior permission of StartUp Movers. The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation.)