- Wednesday, December 25, 2024
Goods and services tax on second-hand vehicles will be applied only on margins and not on sale price of vehicles
By: India Weekly
A REGISTERED person will have to pay GST on sale of old and used vehicle only if the seller has earned a margin, which is the selling price is higher than the depreciation adjusted cost price of the vehicle, sources said.
The GST Council in its meeting last week decided to prescribe a single rate of 18 per cent on sale of all old and used vehicles including EVs, earlier leviable at different rates.
If an individual sells old and used car to another individual, GST would not be applicable.
Sources said where the registered person has claimed depreciation under Section 32 of the Income Tax Act 1961, GST is payable only on the value representing the margin of the supplier, that is the difference between consideration received for the supply of such goods and the depreciated value of such goods on the date of supply.
“Where such margin is negative, no GST is payable,” a source said.
For example, if a registered person is selling an old and used vehicle to any person at ₹1 million, where the purchase price of the vehicle was ₹2 million and has claimed depreciation of ₹800,000 on the same under Income Tax Act, then he is not required to pay any GST as the margin of the supplier, that is differential value of the selling price (₹1 million) and the depreciated value which is ₹1.2 million, is negative.
In case the depreciated value in the above example remains the same at ₹1.2 million and the selling price is ₹1.5 million, GST will be payable on the margin of the supplier i.e on ₹300,000 at the rate of 18 per cent.
It’s important to note that GST on second hand vehicles will be applied only on margins and not on sale value of vehicles (sale value less income tax depreciated cost of vehicle or purchase price, as the case may be).
Prior to the proposed amendment, GST on second hand EVs was applicable on the complete sale value of the vehicle. (PTI)
