GST on Sale of Used Car

There were a lot of confusion and questions about the sale of a car, whether the transaction will be taxable or not under GST. There will be different cases for this transaction; we shall discuss only the sale of a car by a 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

1. 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;
2. import of services for consideration whether or not in the course or furtherance of business;
3. the activities specified in Schedule I, made or agreed to be made without consideration;
4. 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, the sale of a car by a registered person, which forms part of the 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 the revision of rates and the method for the calculation of GST. As per Notification no. 8/2018-Central Tax (Rate) dated 25th January 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 the 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/- Treatment:-

1. If the margin of such supply is negative then it shall be ignored
2. In any other case, the value that represents the margin of the 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.

1. For an Individual or Unregistered person selling his private car will not be taxable under GST.
2. For second-hand goods dealers, the transaction will be taxable and will pay GST on the margin.

Still Confused? Our team is here to answer Write us at info@startup-movers.com Call: +91-94-6565-3535 (This article is authored by Waquar Ansari exclusively for publication at StartUp Movers. No content of this article can be published elsewhere without the prior permission of StartUp Movers. The entire contents of this article are solely for information purposes 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.)