Everyone lives by selling something. However in Goods and Service Tax (GST) regime thinking of selling the old used things, brings more problem about taxation of those things. GST on Sale of old used or second hand car is one of the thing. Confusion is regarding whether it attracts GST if person sold his personal old used car? it attracts GST if person sold his business old used car? What if person sold his commercial old used car? Sold car to car dealer? GST on Unregistered person sold his old used vehicle to registered dealer for further selling? GST on Registered person sold his old used vehicle to unregistered dealer? Registered person sold his old used car/vehicle to registered dealer for personal use? GST apply then at what % rate?
This article covers GST on sale of old used car being used for personal purpose and business or commercial purpose. In other words, it does not include dealers selling the second hand used cars.
The concept of GST is based on the supply of the Goods or services in the course or furtherance of his business.
For instance, BabaTax buys a car for his personal use and after a year sells it to other person or car dealer. Sale of car by BabaTax to other person or car dealer is not to be treated as supply under because BabaTax does not deal in cars or have no business associated with the car.
Definition of ‘Supply’ Under section 2(92) read with section 3
1.(a)all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business,
(b)importation of service, whether or not for a consideration and whether or not in the course or furtherance of business, and
(c) a supply specified in Schedule I, made or agreed to be made without a consideration
2. Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services.
Clause 4 (a) of schedule II says that if goods forming part of the assets of a business are transferred under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer is also a supply of goods.
Thus. a car which is a part of the business assets of the company as the same is capitalized in the books, if transferred, then vide section 7 (1) (d) read with Schedule II clause 4 (a) of the said Act shall be termed as a “Supply” and vide section 9 shall be a taxable supply.
Taking the same case, if BabaTax uses its car for business purpose for example delivery of goods then the sale of car in this case is supply in furtherance of business. Selling of car lying in the fixed assets of a registered person will be a taxable supply. Hence, GST applicable.
The above discussion can be summarized in the following table:
Used by seller for
|Unregistered/ Registered||Personal Use||Unregistered/ Registered||No|
|Unregistered||Capitalized in Books of accounts or Business Use||Unregistered||No, As both the party are unregisterd Levy of GST does not arise.|
|Unregistered||Capitalized in Books of accounts or Business Use||Registered||No, it is not listed under on Reverse Charge Basis on buyers on the seller’s behalf.|
|Registered||Capitalized in Books of accounts or Business Use||Unregistered/ Registered||Yes, as it was used in the furtherance of business.|
|Registered||Dealing in sale or purchase of used car||Unregistered/ Registered||Yes, it is in the course or furtherance of his business
“Business” includes any trade or commerce done with or without an intent of profit or any activity incidental or ancillary to such trade or commerce.
Now, the Question comes at what rate GST is to be charged.
For this regarding government issued Notification 8/2018 Central Tax (rate). on 25th January 2018. Cess is also exempted as per Notification 1/2018 – Compensation Cess (Rate).
List of the Rates applicable in GST on sale of Old Used car/Motor Vehicles as per Notification No. 8/2018 – Central Tax (Rate).
|Sr. No.||HSN||Description of Goods||Rate|
|3.||8703||Old and used motor vehicles of engine capacity exceeding 1500 cc, popularly known as Sports Utility Vehicles (SUVs) including utility vehicles.
Explanation. – For the purposes of this entry, SUV includes a motor vehicle of length exceeding 4000 mm and having ground clearance of 170 mm. and above.
|4.||87||All Old and used Vehicles other than those mentioned from S. No. 1 to S.No.3||12%|
Now, the Question comes at what Value, GST on sale of old used car is charged at what value-.
Vehicle of Vat Regime Sold in GST Regime:
GST is applicable on Profit Margin (Sale-Puchase )
Vehicle Purchased & Sold in GST Regime :
If ITC claim , then GST is on transaction Value .
However, If ITC is not claim , then GST is on Profit Margin (Sale – Purchase)
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