18% GST ON SALE OF CAR AFTER USING IT FOR COMMERCIAL PURPOSE: ADVANCE RULING (GUJARAT BENCH)

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18% GST ON SALE OF CAR AFTER USING IT FOR COMMERCIAL PURPOSE: ADVANCE RULING (GUJARAT BENCH)

03/09/2022

18% GST ON SALE OF CAR AFTER USING IT FOR COMMERCIAL PURPOSE: ADVANCE RULING (GUJARAT BENCH)

1. Applicant M/s Dishman Carbogen Amsis Limited purchased a new car for Rs 80 lakh on February 18, 2018 to use it in business. As per Section 17(5) of the CGST Act, ITC on it is blocked and accordingly the applicant did not avail it.

2. Further, the applicant sold the car for Rs 55 lakh and charged GST as per notification 8/2018 Central Tax (Rate) dated January 25, 2018.

3. Simultaneously, it has applied for advance decision regarding the rate applicable to the car sold by the company.

4. Notification 8/2018 The Authority of Advance Decision through Serial No. 3 for Central Tax (Rate) found that the sale of used car is covered under 18% tax rate.

5. As per sequence no. 3 of the above notification, the old/old ratio of more than 1500cc 18% GST is payable on used motor vehicles.

READ JUDGEMENT:

AAR GUJARAT

DISHMAN CARBOGEN AMCIS LIMITED

ATUL MEHTA & ARUN RICHARD

ADVANCE RULING NO. GUJ/GAAR/R/2022/ 34

01.06.2022

ORDER

Brief Facts

1. The applicant, M/s. Dishman Carbogen Amcis Limited submitted that it purchased a new car [SUV of Specifications, Length > 4000 mm, and Ground Clearance > 170 mm] for Rs. 80 Lakhs on 16-02-2018 for use in its business and did not avail GST Input Tax Credit at the time of purchase as it is restricted under Section 17(5) of the CGST Act, 2017. Depreciation was claimed under the Income Tax Act, 1961 (43 of 1961).

2. The applicant has submitted that it intends to sell the same used car for a consideration of Rs. 55 Lakhs (Inclusive of all applicable taxes). The Written Down Value as per books of accounts is Rs. 47 Lakhs at the time of selling.

3. The applicant submits that it intends to sell the car and charge GST in terms of Notification 8/2018 CT(R) dated 25-01-2018.

4. Questions on which Advance Ruling sought.

1. On what value, the new car purchase by the company is sold after using it for business purpose, shall the GST be charged?

2. At what rate of GST, the new car purchase by the company is sold after using it for business purpose, shall the GST be charged?

3. Whether the value of old and used car, sold by the company as mentioned above, can be taken as the value that represent margin of the supplier, on supply of such car, and whether the GST can be charged on such margin?

4. The value that represent margin of the supplier, on supply of such old and used goods/Car will be inclusive of GST or exclusive?

Personal Hearing

5. Virtual hearing granted on 5-5-22 was attended by Shri Vinod Bohra, Manager and Shri R. Subramanya, Advocate and they reiterated the submission. During hearing, Shri Bohra submitted that the vehicles engine capacity exceeded 1500cc and the fuel used is diesel.

Revenue’s Submission

6. Revenue has neither submitted its comments nor appeared for hearing

Findings

7. As per the submissions of the applicant, We find that subject car has engine capacity exceeding 1500 cc, length > 4000 mm, and ground clearance > 170 mm, with diesel as its fuel. As the applicant submits that it has not availed ITC, We find this used car to fall under the category of sr no 3 to Notification 8/2018-CT (R) dated 25-1-18, reads as follows:

S. No.	Chapter, Heading, Subheading or Tariff item	Description of Goods	Rate
(1)	(2)	(3)	(4)
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. Explanation - For the purposes of this notification, - (i) in case of a registered person who has claimed depreciation under section 32 of the Income-Tax Act, 1961 (43 of 1961) on the said goods, the value that represents the margin of the supplier shall be the difference between the consideration received for supply of such goods and the depreciated value of such goods on the date of supply, and where the margin of such supply is negative, it shall be ignored.	9%

8. We pass the Ruling,

1. The Value for intended supply shall be the difference between the consideration received for supply of said car and the depreciated value of the said car on the date of supply. Depreciation is as per Section 32 Income Tax Act.

2. GST rate leviable is 18% (9% CGST & 9% SGST).

3. Valuation & GST rate of intended supply is as per Ruling at sr no 1 & 2.

4. Valuation, as per Explanation (i) to said Notification 8/2018-CT(R), is exclusive of GST.