New Delhi:
The registered unit will have to pay Goods and Services Tax (GST) on the sale of old vehicle to the seller only if there is margin i.e. profit. The ‘Margin’ amount means the excess of the selling price over the depreciation adjusted cost price of the vehicle. An expert related to the case gave this information on Tuesday. It is noteworthy that the GST Council, in its meeting last week, decided to set a single rate of 18 percent GST on the sale of all old i.e. ‘second hand’ vehicles including electric vehicles (EV). Earlier different rates were charged. If a person sells an old car to another person, then GST will not be charged on it.
An expert associated with the matter said that where the registered unit has claimed depreciation under Section 32 of the Income Tax Act 1961, in such a situation GST will have to be paid only on the supplier’s ‘margin’ price. The ‘margin’ value is the difference between the price received for the supply of such goods and the depreciated value.
“Where such ‘margin’ value is negative, no GST will be levied,” he said.
GST will not have to be paid on negative margin
For example, if a registered entity is selling an old or second hand vehicle with a purchase price of Rs 20 lakh for Rs 10 lakh and has claimed depreciation of Rs 8 lakh on it under the Income Tax Act, then it will not be required to pay any GST. Will not have to be given. This is because the selling price of the supplier is Rs 10 lakh and the current price of that vehicle after depreciation comes to Rs 12 lakh. In this way the seller is not getting any profit on the sale.
If in the above example the value after depreciation remains the same at Rs 12 lakh and the selling price is Rs 15 lakh, then GST at the rate of 18 per cent will have to be paid on the supplier’s ‘margin’ i.e. Rs three lakh.
In any other case, GST will be levied only on the price which is the supplier’s ‘margin’ i.e. the difference between the selling price and the purchase price. Then, where such ‘margin’ is negative, no GST will be charged.
For example, if a registered entity is selling an old vehicle to an individual for Rs 10 lakh and the purchase price of the vehicle by the registered entity was Rs 12 lakh, then it is not required to pay any GST as ‘margin’ as this In case the supplier’s ‘margin’ is negative.
This is a welcome step: Aggarwal
In cases where the purchase price of the vehicle is Rs 20 lakh and the selling price is Rs 22 lakh, 18 percent GST will have to be paid on the supplier’s ‘margin’ i.e. Rs 2 lakh.
Saurabh Aggarwal, tax partner of EY, said that the GST Council has recommended increasing the GST rate on old electric and small cars running on petrol and diesel from 12 percent to 18 percent. It has been brought down to the level of rates prescribed for large cars and SUVs.
It is noteworthy that GST on ‘second hand’ vehicles will be applied only on the margin and not on the selling price of the vehicles (selling price minus income tax depreciation cost or purchase price of the vehicle).
Before the proposed amendment, GST on old electric vehicles was applicable on the full selling price of the vehicle.
“Therefore, the proposed change should not be seen as a hindrance to the legacy electric vehicles,” Aggarwal said. This is a welcome step as it is likely to reduce the cost of old electric vehicles.
(This news has not been edited by the NDTV team. It is published directly from the syndicated feed.)
