Team-BHP - Effect of GST on Car Leasing

Quote:

Originally Posted by spr1ngleo (Post 4640124)

Thank you. I am eyeing at Nexon petrol XT+. Not sure if that's really a high end car. Driver salary of 18k, fuel reimbursement of 15k, an EMI of 26k, at 18% residual value. I will buy back the car at end of 36 months, and plan to keep it for its lifetime. Your opinion please?

TIA.

Go for it!
Plus you will have another 3 years to identify an allowed family member/friend in whose name you can transfer the car at end of lease period (and save perquisite tax as well) :)

Buying less than 4 meter and <1500cc petrol engine car is most beneficial under car lease/GST regime from tax purposes.

Hello Everyone,

I have pre-GST regime lease car.

As per my understanding, three year of discount period for GST on lease car should be over in June 2020. My lease will end in Nov 2020. I am planning to terminate lease before the discount ends. Any advice whether it will be good idea to terminate lease before June 2020?

Do anyone have any update on the petition filed in the court?

Thanks in Advance!

Quote:

Originally Posted by anubhav22 (Post 4642336)

...
Buying less than 4 meter and <1500cc petrol engine car is most beneficial under car lease/GST regime from tax purposes.

Can you help me understand the calculation behind this statement? AFAIK the GST percentage on a lease rent is same as the GST percentage the car falls in. Then how come a lower GST slab is beneficial?

If you calculate the EMI + residual value (incl GST) for a small car and then deduct the tax savings, it works out to just around 3-4% interest. On top of that, you might potentially get reimbursement for fuel, service, insurance, driver salary etc depending on your company (or get it cut from your allowance, which in turn means a straight 30% savings (or less) depending on your tax bracket). Which makes it pretty attractive for a car falling under 4m car

Quote:

Originally Posted by sanchari (Post 4765049)

But this would be true for larger cars as well. Why only < 4m?

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Originally Posted by ank.nsit (Post 4765060)

But this would be true for larger cars as well. Why only < 4m?

For >4m car, the effective interest rate increases much more as the GST on the lease rate will increase. One has to check the lease rates offered by their company including GST, and then do the calculations to see if its worth it or not.

Also, most important point, go for lease only if you plan to stick around in that company for the entire leasing duration. Breaking lease is pretty expensive, and if your company offers transferring lease to another employee, then that would be a viable option.

Hi, for people who have recently closed their lease, can someone let me know how the calculations were done for gst on residual value and security deposit.
In my case, I had taken an X1 on lease about 4 years back. That time I had made a security deposit of about 5.4 lacs. The residual value was to be about 7 lacs. Now the lease is getting over and the calculation I have received from the leasing company is 7 lacs plus 48% gst minus security of 5.4 lacs. My question is whether gst should be calculated on RV or RV minus Security. This calculation alone makes a difference of about 2.5 lacs for me so asking

Quote:

Originally Posted by fatsoboy (Post 4956098)

the calculation I have received from the leasing company is 7 lacs plus 48% gst minus security of 5.4 lacs. My question is whether gst should be calculated on RV or RV minus Security.

If they have not treated your security as an advance EMI or Down-Payment, you will have to pay GST on the residual. They will refund security seperately.

Quote:

Originally Posted by nsbhagwat (Post 4421737)

All,

Do leasing companies lease out car to individuals? If yes which would be a good leasing company? My company does not have a car lease policy.

Mods:- Merge this thread in an appropriate one if posting location is incorrect.

Regards
Nikhil

Yes, It is possible for an individual to lease a car in India. Retail car leasing is a type of leasing product that is designed particularly for self-employed professionals (eg: Doctors, CA, Lawyers, & Architects), business owners and for an individual to lease a car. Incase of a business owner or self employed professionals, the monthly lease rental payments are tax-deductible.

Some of the best leasing companies in India include Orix, ALD & Lease plan. Check out this link to know the top 5 leasing companies in India - List of Top 5 Best Car Leasing Companies In India

Quote:

Originally Posted by Anuruddhs (Post 4603646)

Case is still ongoing in Delhi high court, They have send some lame documents to make fool in last hearing which we need to oppose and file reply before August. Also GST council member called last week and asked us to send our issue as they might take it in July budget. Wait is only option and we will keep pursuing the case.

Is there any update on the case ?

What is the current calculations right now.

My office is starting with lease options again very shortly and was wondering if it’s a good idea to go ahead with it.

Quote:

Originally Posted by Altocumulus (Post 5405458)

This case and VAT-GST questions only apply to folks who got the car in VAT regime and GST got introduced. It was pretty bad at that point and quite a few of my colleagues had to foreclose in hurry.

Taking a car on the lease if it is beneficial really depends on how your company has structured it, so get a calculation sheet (hopefully excel) from them which will allow you to play with and understand the total cost and expected savings. Also leasing company will share a sample amortization calculation sheet which gives you more idea.

Generally speaking I would keep these in mind,

Will be lease be taken out of your pretax income reducing it giving you tax savings - Usually yes otherwise not much point in taking lease since rates are usually higher
What are the min-max lease duration and applicable interest rates?
What can be claimed as expenses - My company allows fuel, service costs, warranty, and insurance
Can you do part payment when buying the car?
What will be the residual value of the car? (usually percentage like 1%, 5%, ..) you have to pay GST on the residual amount
Will the car be in your name and hypothecated or in your company name ? If in your company name then you become 2nd owner after lease end so you may not get the best deal when selling
How does foreclosure work if you leave the company?

Generally what I have seen is that the shorter the company lease more savings on the car.
For example with 2 years lease, you could end up paying less than the on-road cost at end of 2 years
But for a car planned to be used extensively, a longer lease makes sense as fuel reimbursement and service cost savings are higher.

Quote:

Originally Posted by ank.nsit (Post 4765040)

Because the GST gets offset but not the cess. Compensation cess is least on <4M, <1200cc petrol car (1%) followed by <4m, <1500cc diesel car (3%) going upto 22% on big cars.

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Originally Posted by pannags (Post 5603455)

This thread has not seen an update since years!

Was wondering if anything has changed in how GST is applied in employee leased cars? Are the lease EMIs still charged at 43% GST?

My company seems to have rolled back the employee car lease plan due to complete lack of interest from employees.

48% (14% + 14% + 20%) on finance, and 18% (9% + 9%) on fleet management are the taxes on EMI components. :disappointed

And 48% (14% + 14% + 20%) tax on buyback value. :eek:

The %ages above are for a SUV (for your reference).