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sale of car, Goods and Services Tax - GST

Issue Id: - 113103
Dated: 24-11-2017
By:- DK AGGARWAL
sale of car

  • Contents

Sir

we want to sell the old car purchased before July 2107, registered in the name of Firm to another firm duly registered under GST.

Please inform if GST is applicable on sale of old car and if so whether GST input is available to the new buyer.

Please inform the rate of GST if applicable

Regards

D K Aggarwal

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Posts / Replies

Showing Replies 1 to 15 of 19 Records

1 Dated: 24-11-2017
By:- ANITA BHADRA

Dear Sir

Yes , GST is applicable ..

As per schedule 1 of CGST Act , permanent disposal of business Assets will be treated as supply .

Rate of GST will be 28%

ITC will not be available to New buyer as sec 17(5)(a) of CGST specifically states- ITC will not be available in respect of Motor Vehicle subject to certain conditions ie further supply of motor car etc etc .

Regards

CA Anita Bhadra


2 Dated: 24-11-2017
By:- Ganeshan Kalyani

GST is applicable @ 28% plus cess.


3 Dated: 25-11-2017
By:- KASTURI SETHI

There has been lengthy discussion on this issue in this forum so many times. Sale of car in this case is supply in furtherance of business. Hence GST applicable.


4 Dated: 25-11-2017
By:- CS SANJAY MALHOTRA

Dear Friends,

I have different views that the sale of used car is not taxable which is area prone to litigation.

Firstly, Govt has come out with Notification No. 37/2017 CGST (Condition No 2) and Cess Notification No. 07/2017 thus providing the Value on which GST is to be paid for sale of used car purchased prior to 01.07.2017.

GST is to be levied at 28% + Applicable Cess on the 65% Value of consideration.

Secondly my views, which make used car not liable to GST. We all agree that the taxing the sale of Used Car results in Double Taxation i.e. one which is charged at the time of sale by Car Manufacturer and secondly when the registered person in GST sells off.

Important is the coverage in the definition of supply to attract GST Liability.

Definition of Supply is stated in Sec 7(1) of CGST Act and Supply includes (a) all forms of supply.........................in the course of furtherance of business. Reference should be made to definition of Business as placed in Sec 2(17) of CGST Act.

In the present case, the company business is not to sell the Cars and it has been held in catera of judgments that if the business is not done with an intention to sell cars, then the activity can't be classified as Business activity.

In order to be supply, above essentials is must or else GST is not applicable.

In short, depends upon the supplier whether he would like to take chance or not to fight the case if he opts for non payment of GST.

Interesting point to make note. Suppose person A (not in Business of Cars sales / purchase) in GST purchase Motor Vehicle and sells off after 2 years. He is not eligible to take ITC as per Sec 17(5) of CGST Act. If he is forced to pay GST at the time of sale, he stands to loose as double taxation arises.

Suppose person B (who is in Business of Cars sales / purchase) in GST purchase Motor Vehicle and sells off after 2 years. He is eligible to take ITC CGST Act. If he sells off Motor Vehicle, he has to pay. He will not stand to loose as he has availed ITC at the time of purchase and cost for his is less in comparison to Person A.

Law makers should have taken care while drafting the law that Tax Liability should not have been in place for for those who are not eligible for ITC and who are eligible for ITC.


5 Dated: 25-11-2017
By:- Ganeshan Kalyani

Sri Sanjay Sir, I totally agree with your views. Why should a person pay tax twice on a particular product. If law tells to pay tax to the person not dealing in the same product then input tax credit should be allowed.


6 Dated: 25-11-2017
By:- KASTURI SETHI

Sh.CS Sanjay Malhotra Ji,

Sir, Logic is convincing. Your suggestion is fully of substance.


7 Dated: 25-11-2017
By:- Ramaswamy S

There is a clarification from CBEC wherein it is clarified that the GST is payable on the difference between the purchase (of second hand car) price and the selling price of the second hand car (to the third person).

Regards

S.Ramaswamy


8 Dated: 25-11-2017
By:- CS SANJAY MALHOTRA

Sh. Ramaswamy ji,

It's not clarification but Notification No CGST 10/2017 dated 28.06.17 which is applicable to Dealer of Second Hand goods operating under Margin Scheme.


9 Dated: 25-11-2017
By:- KASTURI SETHI

and Querist or his company is not a dealer of second hand goods.


10 Dated: 25-11-2017
By:- Ramaswamy S

Thank you Mr Sanjay. I stand corrected. Its notification 10/2017 (post the clarification that I received from GST council through sms).


11 Dated: 25-11-2017
By:- Ramaswamy S

I do not see it as a double taxation. The reason is as follows:

1. The sale of used car - disposal of asset and is a supply. Outward GST is applicable.

2. The reduction in the rate of tax at 65% of the CGST rate if the credit is not availed. Since ITC is not available, there is a reduction in the rate of tax, else the rate of tax would be the same at 28% +cess.

Regards

S.Ramaswamy


12 Dated: 25-11-2017
By:- ANITA BHADRA

Interesting and informative discussions


13 Dated: 25-11-2017
By:- Ganeshan Kalyani

Yes, indeed.


14 Dated: 26-11-2017
By:- CS SANJAY MALHOTRA

Sh Ramaswamy ji,

Firstly GST Act provides tax on supply of business asset and not asset as both have varied meaning.

Secondly if tax is charged on same transaction twice, it’s double taxation whatever rate may be. Not to forget that this concessional rate is for 3 years and afterwards full 28% + cess. Can we say that it’s double taxation after 3 years.

We we have seen in past so many years that Notification is applicable only if Dept establishes the basic objective. Struck down many times by higher courts. Dept has to prove that the sale of car is business asset.

We are in this debate not to blindly follow the law laid down by Govt but to make them aware the deficiencies to amend the same before Apex court overrules their notification.


15 Dated: 26-11-2017
By:- KASTURI SETHI

Sh.CS Sanjay Malhotra Ji,. Sir, you have gone into depth. Really it is peerless. Your come back in this forum has infused life in it. No. of questions per day has increased appreciably. I am relishing your replies. Thanks.


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