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IMPACT OF GST ON AUTOMOBILE DEALERS

Goods and Services Tax - GST - By: - Dr. Sanjiv Agarwal - Dated:- 5-5-2017 Last Replied Date:- 12-5-2017 - Present Indirect Taxation This sector basically comprises of Manufacturers, Automobile Dealers & Retailers. Presently, all of them are paying various indirect taxes such as: Excise Duty on manufacture/production of vehicles along with cesses, Service tax on services both as provider and also as receiver under reverse charge, Value added tax (VAT)/Central sales tax (CST) on Sale of Vehic .....

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ingly, transactions between distinct persons will be subject to levy of GST. Registration Under GST regime every person who is liable to be registered under the Act, shall have to apply for State-wise registration for supply of goods/services from different States. There is no concept of single centralized registration under GST regime as is presently done. This will pose problems of compliance and hardship to tax payers having operations in more than one state. Valuation As per section 15 of th .....

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n cess if charged separately by the supplier. (Example: toll tax etc.) Amount paid by the recipient w.r.t. supply on behalf of supplier and not included in the price actually paid or payable (Example: Labour payment made by the recipient on behalf of supplier) Incidental Expenses such as employee insurance interest or late fee or penalty for delayed payment of any consideration for any supply (Example: Interest on delayed payments) Value of subsidies linked to supply excluding subsidies provided .....

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as is attributable to the discount on the basis of document issued by the supplier. Accordingly, transaction value shall be considered for payment of tax, with various inclusions prescribed in the valuation provisions where price is the sole consideration for sale and parties are not related . The powers for rejection of the transaction value are very wide, and could lead to significant valuation disputes which are currently also being faced by the Automobile industry like- Sale below the cost .....

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utomobile industries are a challenge which require redressal from your good office: Road Tax/ Life Tax - Currently, service tax or VAT is not paid on the Road Tax element. However, in the GST regime, value for the purpose of paying GST should also include Road Tax. Section 15 of the GST law clearly states that no taxes shall be allowed as reduction from the value except CGST, SGST/UTGST and IGST. Therefore, duplication of taxes to this extent will continue, as road tax is not being subsumed in G .....

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e, Insurance of the vehicle, Temporary/ permanent registration charges, High security number plate charges, Credit card swiping charges etc. Any other ancillary charges . Currently, Service Tax is not paid on such values, if collected as a pure agent. Under GST law, such specific provisions are not yet specified and it should be made amply clear that these amounts shall be treated as out of GST net and valuation of reimbursements as pure agent may be kept out in the valuation rules. Valuation of .....

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the condition that the same is shown in the invoice and is in the course of normal trade practice. The term normal trade practice is very subjective and especially in the automobile industry, the discounts vary depending upon the variants, new product launch, etc., and this may lead to valuation disputes. Post-supply Discounts- Generally, dealers receive various discounts from its manufacturers based on targets, vehicles lifted, Special Customers, Year-End Discounts etc. It is pertinent to note .....

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hemes are not an independent service by dealers to the manufacturers, but are in the nature of post-sale discounts. If such incentives or discounts are in the nature of post-supply discounts, then they shall be excluded from transaction value for the purpose of payment of GST subject to conditions as provided in law and is known before hand. But if such schemes are treated as services by dealer then in such a case, these shall be included in the transaction value and shall be subject for payment .....

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ade for the supply, unless the same is applied as consideration for the supply. There may be two views taken for advances for supply, i.e. Either it can be treated as payment received towards supply i.e. consideration for supply or; Can be treated as deposit . If second view is taken, the date of appropriation of the deposit towards a supply may be treated as the date of payment. This would also lead to ambiguity in interpretation as to what should be the date of such appropriation (like date of .....

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re, dealers may either have to pay tax on the advances also out of pocket or may collect taxes extra even on the token advance. Free Service Coupon Vouchers-These coupons are issued at the time of sale of the vehicle. As per the time of supply provision, GST on such coupons will have to be paid immediately on the date of issue of such vouchers. As per the practice of some manufacturers, the amount in respect of such coupons is redeemed to the dealers only when the customer brings the vehicle for .....

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GST registration number is obtained for each such dealership, then transfer of any goods/ services between such dealerships will also be liable for GST. This will result in blocking of the working capital as the taxes needs to be paid from own funds and collection of taxes will be at a later date when such goods/ services are eventually sold. Tax on Second Hand Vehicles In GST, there may be additional tax burden on transactions in second-hand motor vehicles and exchange of vehicles. The proposed .....

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capital requirements of dealers of used vehicles. Earlier the tax used to be calculated on the discounted value of a product in the case of exchange schemes after the market value of the old vehicle was deducted. Working Capital GST is also likely to affect the working capital and cash flows of dealers as GST would be applicable on inter-unit transfer of motor vehicles, advances for booking, free service coupon arrangements with dealers and all types of incomes for commissions/incentive/pay outs .....

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y of Goods and Supply of Services and accordingly taxed at the applicable rates or will it be treated as Composite/Mixed Supply on Case to case basis?? 2. Whether Provisions of Sec 140(3) shall cover already registered Automobile dealers who are also running their Service Workshop for servicing of Vehicle?? 3. Admissibility of Cenvat Credit on Demo vehicle i.e., Excise Element paid on Excise Bills, though such cars have been capitalized in books of Accounts of the Dealer. Thanks & Regards, - .....

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in many cases to dealers when they are actually used by customer at service stations not at time of issue. So the time of supply and consideration is a later date when they actually used by customer not when they are issued.As 25-35% of coupons remain unutilized so they never actually paid by manufacturers.3. Discounts and target incentives which are part of dealer reimbursement decided at starts of financial year or are time to time announced by manufacturers would be subjected to GST or not? - .....

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demo vehicle if it is being capitalized Road tax is not being subsumed in GST Free service coupons may taxed at redemption (Refer place of supply provisions in IGST) Pre-announced discounts or incentives may not be taxed. You may write to asandco@gmail.com or sanjivservicetax@gmail.com - Reply By abhishek ghai - The Reply = Respected Sir, Please clarify whether the following stands correct as in my opinion benefits of Sec 140(3) would be extended to already registered persons i.e., trader/Servic .....

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