Effect of GST on Car Leasing

[anubhav22]

Originally Posted by Cooltronics

Well, inspite of knowing that existing lease car owners are double charged or rather tripple charged or more (14.5% to 50%),

It was 14.5% but credit of VAT paid while car purchase was allowed. Meaning by VAT on ex-showroom was nullified or assume no VAT charged on ex-showroom component of emi.
So effective tax rate on car lease was ~2% (14.5% on 14% interest component of emi)

Only 3 states did not allow credit. more details below:


So effective tax increase is from 2% and not 14.5% as popularly believed (unless we were taking car lease from Gujrat/Kerala/UP)

[achopraa]

My understanding of abatement is as follows.

Assuming current lease as 10000.
GST as 48% applicable is 4800
Total Lease paid is = 10000+4800= 14800.

After abatement of 35%
GST of 48% applicable on 6500 (10000-3500)
Effective GST 3120
Total Lease now is = 10000+3120 = 13120
Effectively 31.2% GST as per revised norms.

In Summary, 65% of 48%(or whatever is currently applicable GST slab) of your Lease is the new GST rate applicable for old vehichles.

[anubhav22]

Originally Posted by anubhav22

Only 3 states did not allow credit. more details below:

Image was not visible, attatching.
Correction: 4 of major states did not allow but UP was only 5%

[quadmaniac]

Originally Posted by anubhav22

Image was not visible, attatching.
Correction: 4 of major states did not allow but UP was only 5%

[/IMG]

Hey Anubhav, what does the above mean? Does this mean we get input tax credit for the months where we paid VAT plus GST?

Also, can someone confirm - currently does the GST part become 65% of what it was? To take an example, say my base EMI was 30k (without VAT/GST whatever):

Current GST is 30k * 45% = 13.5k.

Which after announcement should become .65 * 13.5 = 8.7k

Is my understanding correct? Thoroughly confused

[anubhav22]

Originally Posted by quadmaniac

Hey Anubhav, what does the above mean? Does this mean we get input tax credit for the months where we paid VAT plus GST?

Also, can someone confirm - currently does the GST part become 65% of what it was? To take an example, say my base EMI was 30k (without VAT/GST whatever):

Current GST is 30k * 45% = 13.5k.

Which after announcement should become .65 * 13.5 = 8.7k

Is my understanding correct? Thoroughly confused

VAT Application & Credit was only till July 01. And so is my chart applicability, specifying that VAT was applied and most states gave credit nullyfying it.
From July 01 we entered GST regime where VAT application and credit for car lease was stopped (GST application and credit started)

Since car purchased before July 01 had not paid GST, no GST Credit was available.
Those car had paid excise and VAT whose credit in GST regime is not allowed.

This is the double taxation that is widely spoken and impacted emi. (Paid Excise+VAT and now pay GST on whatever remaining base value.



I think below represents my understanding. Since VAT credit is disallowed, it should be:
.65 X (base value emi + VAT part of base cost + Lease charges/interest if not part of base value emi) X GST Rate
(Rest your leasing company will give exact)



On Side note:
http://www.business-standard.com/art...0700617_1.html
"
Menon said the 35 per cent abatement on GST payable on existing car leases is indeed welcome but is not good enough as still the lessee will end up paying 28-30 per cent GST as against 15 per cent service tax in the earlier regime.
"

However the service tax was not applicable so I beg to differ from this article. (Refer: https://taxguru.in/service-tax/servi...-service.html/)

VAT was there on full emi and there was credit available for it.

Looks like proper representation regarding tax impact did not reach governement or they ignored it.

[BoneCollector]

Just read this on Twitter. Not sure if it's regarding the same company lease policies. There was not much detail available.

Mods, merge it to a relevant thread if it belongs somewhere else.

[vsrivatsa]

Few more articles on the same topic:

Leased vehicles: Government provides clarity on tax rate : URL

Leasing vehicles purchased before July 1 to attract 65% GST: URL

[yajaman99]

Originally Posted by vsrivatsa

Few more articles on the same topic:

Leased vehicles: Government provides clarity on tax rate : URL

Leasing vehicles purchased before July 1 to attract 65% GST: URL

Thanks, so for understanding people like me who are pre GST, will get a discount of 35% on the existing GST.
eg my lease went up by 7K and now it will be Rs 4550/-.

Still a raw-deal but something is better than nothing.

[quadmaniac]

Guys, did your lease provider give any updated calculation of the EMI post the announcement? Ours has kept mum so far (Orix).

[sridharp77]

In my company they have reverted back to the old amount which was being collected prior to implementation of GST for this month.

[ptaneja]

Originally Posted by sridharp77

In my company they have reverted back to the old amount which was being collected prior to implementation of GST for this month.

That's strange - reverting back to old pre-GST rates doesn't make sense as the taxes even after this final change are more than pre-GST rates.

For instance, I got the following from my leasing company -

LR_Amt FMS SGST CGST Cess Total Amount
7328 3521 1343 1343 73 13608
7328 3521 984 984 48 12865

First row is for Post-GST rates.
Second row is after this modified ruling.
For celerio ZXi AMT, I can see a difference of about 750/- reduction in EMI per month.

[Anuruddhs]

GOVT. did not respond, They gave some respite like we were beggars. Lease companies also did not put strong case as they have not lost much.

We as a group of around 300 people have decided to file the case in high court against dual taxation on car leased pre gst.

[quadmaniac]

To add to this, our lease company (ORIX) now claims that the 65% rate stands effective only AFTER the announcement. Which means that the reduced GST is not applicable for the months of July to October (4 months).

Has anyone else heard this story?

[vsrivatsa]

Originally Posted by quadmaniac

To add to this, our lease company (ORIX) now claims that the 65% rate stands effective only AFTER the announcement. Which means that the reduced GST is not applicable for the months of July to October (4 months).

Has anyone else heard this story?

Everyone wants to loot the salaried class of their hard earned money...first it was the Govt. via double taxation and now the leasing companies? Huh!
I have emailed LeasePlan and they asked for time to respond and did not provide any info.

Check the image posted earlier on this same thread: URL

It clearly states "w.e.f. >> with effect from 01 Jul" - so I do not think they can loot people of 4 months worth of additional money.

Maybe the other guys who are filing a case in High Court, should cover this aspect also that no Leasing Firm shall be allowed to keep the additional money that was collected for the 4 months prior to the revised judgement...

[quadmaniac]

Originally Posted by vsrivatsa

It clearly states "w.e.f. >> with effect from 01 Jul" - so I do not think they can loot people of 4 months worth of additional money.

I pointed this out to them too. They got back with an email conversation with the GST council, which I'm attaching - which seems to state that this is applicable from 13th October.

I plan to email them separately once again - this is utter nonsense!