GST Liability on used Cars
Government by issuing the Notification No. 8/2018 Central Tax Rate read with state Tax Notification, reduced the Rate of GST on old and used vehicle as follows:
1. GST-18% on Old and used, petrol Liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven motor vehicles of engine capacity of 1200 cc or more and of length of 4000 mm or more.
2. GST-18% on Old and used, diesel driven motor vehicles of engine capacity of 1500 cc or more and of length of 4000 mm
3. GST-18% on Old and used motor vehicles of engine capacity exceeding 1500 cc, popularly known as Sports Utility Vehicles (SUVs) including utility vehicles.
4. GST-12% on All Old and used Vehicles other than those mentioned from S. No. 1 to S.No.3
Government also Exempted the Cess applicable on sale of Used vehicle through Notification No. 1/2018 Compensation Cess Rate.
Value on which GST at above rates to be calculated shall be Margin of Supply which is to be calculated in the manner as mentioned in Notification which is given below:
A. In Case Depreciation under Income Tax Act Availed: Margin of supply shall be difference between Sale consideration and Written down Value and tax to be calculated on such Margin, and where the margin of such supply is negative, it shall be ignored.
B. In other cases: Margin of Supply shall be difference between sale price and purchase price Tax to be calculated on such Margin, and where the margin of such supply is negative, it shall be ignored;
Further GST is essentially a tax only on commercial transactions. Hence, only those supplies that are in the course or furtherance of business qualify as supply under GST. Hence, any supplies made by an individual in his personal capacity do not come under the ambit of GST unless they fall within the definition of business as defined in the Act. Sale of personal used car by an individual will not attract GST (neither in the hands of buyer nor seller) because it is not covered within the meaning & scope of supply, since the element of ‘furtherance of business’ test is missing.
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