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NEW DELHI: While maintaining that only registered businesses involved in sale and purchase of vehicles, govt sources have said goods and servcies tax (GST) of 18% will be applicable on the margin of sale – the difference between the price at which the vehicle was bought by the business and the price realised on sale.
So, if a vehicle is bought by a business for say Rs 8 lakh and sold for Rs 10 lakh, the GST liability will be Rs 36,000. GST was applicable on used cars earlier as well but only in case of electric vehicles the rate has been increased from 12% to 18%, bringing them at par with petrol and diesel vehicles.
“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 – 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 instance, if a car was purchased for Rs 20 lakh and depreciation of Rs 8 lakh was claimed, resulting in a depreciated value of Rs 12 lakh. If the used vehicle is sold for Rs 10 lakh then the margin is negative and no GST is to be paid. But if the same car was sold for Rs 14 lakh, then 18% tax will be levied on the Rs 2 lakh margin, resulting in Rs 36,000 GST.
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