[samabhi]

Got a note from my company car leasing group, that the new 25% cess on luxury/SUV vehicles will be applicable for cars under lease contract too. Which means, the effective tax on the Actual rentals will shoot up to 53%. This will come into consideration, once the GST council passes the mandate next month, i.e. on Sep 7. On one side, we are hoping that GST council will pass some benefit too the Car Leasing Industry for the cars purchased pre-GST time and in reality, they are increasing it even further.

What is even more ridiculous is the fact that if we have to close in advance, we will now have to pay 43% tax on the actuals instead of 14.5%.

[Turbanator]

Folks, maybe little OT, I need to understand how a lease in India works differently than an outright purchase, say if we buy on a company name or personal?

[Turbanator]

So, I called some guys and understood how this is working. Most of the things are clear but one query for which there is no clear answer yet.

Can we claim ITC on Lease rentals?

[316kmph]

Originally Posted by Turbanator

Can we claim ITC on Lease rentals?

From my interactions with a couple of reputed GST consultants. No :-(.

No, unless your primary business has to do with cars. Say, you are in the taxi business or something like that.

Hope more clarifications come in on Sep. 9th.

Also, (off topic wrt leasing) when you sell your car to a any person whether or not GST registrant also the same rates (28% and 43 / 53%) apply!! This makes a case of double taxation. Let's see what happens.

[Sawyer]

I may be wrong, but for any company that is registered under GST, will not any GST paid by it to its suppliers of goods or services offset the liability to pay GST collected from its customers? The first principle about GST is that it should not cascade and the burden on any customer should be only the GST he pays - all preceding GST paid by the supply chain should not be a part of the costing anywhere in the supply chain.

If this is true, isn't this a non issue for any company that has taken cars on lease - even for a company in the hotel business as one example? So long as said company is collecting and paying GST?

[Turbanator]

No, unless your primary business has to do with cars.

Well, they have laid these guidelines for claiming ITC on new cars, technically Lease rentals are your expenses so ITC should be available. I think in absence of any rule or clarification otherwise, we should be able to claim it.

when you sell your car to a any person whether or not GST registrant also the same rates (28% and 43 / 53%) apply

Conflicting views, as per a local dealership this is applicable on all company registered cars and present rate is 28 % irrespective of size and capacity. But as per a used car sales dealer, nothing is applicable. In my opinion, if they plan to charge GST on corporate used cars they should give the benefit of input claims also. But perhaps they are trying to link depreciation with it. Overseas, if you sell your car to a dealer, GST on the new car is charged only on the difference of the cost of new and your trade. Wish sense prevails here sometime.

all preceding GST paid by the supply chain should not be a part of the costing anywhere in the supply chain.

Correct, but that's not the case on few things including Cars, thankfully all such products which are not under GST, companies can still claim depreciation benefits.

https://www.hubco.in/articles/12-cas...d-with-example

https://cleartax.in/s/gst-cases-wher...is-unavailable

[VaibhaoT]

I noticed this article today.

http://timesofindia.indiatimes.com/b...w/60433440.cms

I am particularly anguished at following statement quoted by ToI.

Government sources told TOI that the leasing companies did not appear to have a strong case as they had claimed depreciation benefit, which negated the impact of the higher tax.

I find it total nonsense. Is government only trying to avoid the clear case of double taxation?

[vsrivatsa]

Looks like the GST Impact on existing Pre-GST Car Leases was not covered as part of today's GST Council meeting also.

Here is some coverage from before today: URL

So, I guess its a wait of another month for the next GST Council Meeting. Meanwhile, those who bought an SUV on lease such as the XUV500 would need to shell out an additional 7% due to the cess levied today...

[chennai-indian]

My Rs 26000 lease payment had gone up to Rs 35000 odd post GST. Recently my company HR told me that it is going to increase again and may become more than Rs 40 K!!! Well for a Rs 40K EMI, I can get a much better vehicle if I take a car loan than the leased Honda City that I have!!

[slakhs]

Is it not possible to go to court

[Anuruddhs]

I am planning to go to court will inform you guys , this is enough. My lease rental is now around 96k for a 20 lacs cars which was 67k pre gst. I was waiting for this meeting to happen if no outcome then no option left. Gst council is not listening at all.

[anubhav22]

Originally Posted by Anuruddhs

I am planning to go to court will inform you guys , this is enough. My lease rental is now around 96k for a 20 lacs cars which was 67k pre gst. I was waiting for this meeting to happen if no outcome then no option left. Gst council is not listening at all.

All the best!
In the meantime, discuss with leasing company to remove GST on residual value.
(Unlike VAT, GST is not to be applied on old cars)

Also see if depreciation benefits can be passed by your organisation / leasing company as intended by govt.

[quadmaniac]

Originally Posted by anubhav22

Also see if depreciation benefits can be passed by your organisation / leasing company as intended by govt.

Can you explain this further please? I am one of those whose EMI is shooting up from 14.5% to 45% - and the governments once-a-month lazy meetings are totally worthless. This is a clear case of double taxation and a crime.

[Anuruddhs]

Originally Posted by anubhav22

All the best!
In the meantime, discuss with leasing company to remove GST on residual value.
(Unlike VAT, GST is not to be applied on old cars)

Also see if depreciation benefits can be passed by your organisation / leasing company as intended by govt.

Hi Anubhav,
do you have any supporting article for depreciation benefits can be passed by your organisation / leasing company as intended by govt. I am looking for this to pass on to my organisation.

[VaibhaoT]

Originally Posted by anubhav22

All the best!
In the meantime, discuss with leasing company to remove GST on residual value. (Unlike VAT, GST is not to be applied on old cars)

I recently got the quote from lease vendor to foreclose the lease. He applied full GST on foreclosure value. Do you have any reference, for above point which I can put forward to the vendor (Orix in my case)?