The registered unit will have to pay GST on the sale of second hand vehicle only if the seller makes a margin i.e. profit.
In its meeting last week, the GST Council decided to fix 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. On this, an expert related to the matter said on Tuesday that the registered unit will have to pay GST on the sale of second hand vehicle, the seller of the vehicle will have to pay only if there is margin i.e. profit.
…then GST will not be applicable
Understand here, if a person sells an old car to another person, then GST will not be charged on it. Experts say 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. Margin price 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 charged.
This is how you understand what was said
For example, suppose a registered unit is selling an old or second hand car with a purchase price of Rs 20 lakh for Rs 10 lakh and has claimed depreciation of Rs 8 lakh on the same under the Income Tax Act, then it will not have to pay any tax. No GST will have to be paid. 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 percent will have to be paid on the supplier’s margin i.e. Rs 3 lakh.
In which cases 18 percent GST will have to be paid
In any other case, GST will be levied only on the value 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 unit is selling an old vehicle to an individual for Rs 10 lakh and the purchase price of the vehicle by the registered unit was Rs 12 lakh, then it is not required to pay any GST as margin because in this case the supplier’s margin is Rs. Is negative. In such 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.
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