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-   -   Used car GST rates slashed from 29 - 54.7% to 12 & 18% (https://www.team-bhp.com/forum/indian-car-scene/194596-used-car-gst-rates-slashed-29-54-7-12-18-a-2.html)

Just a small correction, if I may. When you pay tax under RCM, you are then eligible for input to the extent of tax paid. This is exactly same as how URD purchases were treated under VAT regime. It has Zero impact on your bottomline.

And as far as I know, VAT was always applicable on vehicle sales by a company/firm. It's just that people used to get away with it.

Not at all places, some states like in Haryana & Punjab, it was fixed Rs 5000 and nothing in Chandigarh but now it becomes 18 % which is harsh given there is no ITC. I see prices of second-hand cars especially in luxury segment getting higher

For the sake of example if someone buys a company registered used car for 1cr. The seller company will charge 18% GST so cost to new buyer will be 1.18cr? If the new buyer is also buying on company can they claim the 18 lakhs GST back as input credit?

Yes, correct. 18 % is a too large amount I feel given the already high tax rates on a New car with ZERO ITC.

Unfortunately not, as ITC is not allowed on Cars unless someone is into leasing or the vehicle is in exclusively used for transportation of goods, basically same conditions as applicable on the new Car Purchase.

It's a huge setback for us as I see it. The prices in 2nd hand car market is always quoted/presumed all inclusive.
Will surely lead to heavy cash component to save on the additional18% gst.
Can't understand when the govt. has already pocketed heavy gst & cess without input, why they are hell bent on multiple taxation.
So if my car which is registered in our partnership co's name in which me & my dad are partners, the car is worth say 3 lakhs, then should i sell it first to my mom for say 10k & then sell to the third party (individual or corp or dealer)?

The GST rates on used cars/bikes (non vintage and classic categories) is mainly for the used car dealer's consumption. The dealer/ broker gets a commission on each sale. Only this commission/ brokerage is taxable. The GST law when implemented wef 1/07/2017 made it amply clear that while reselling, if the resale price is more than the cost price, GST will apply on the price difference or profit margin by the seller.

Now in 99 to 100 % cases for newer cars, these depreciate and sometimes like Hell (if there is any ? Or if not this case will make us believe in Hell ! :Shockked:Please see the Mercedes GL 63 AMG thread, where the owner of a Rs 1.95 crore Merc SUV used for about two to three years with 19,000 kms on its odo, is offered a resale value of Rs 65 lakhs.

http://www.team-bhp.com/forum/super-...ses-trade.html

Now taking this as an example, the buyer had already paid all the taxes (then Central Excise + State Excise + Octroi and VAT if applicable). Now he may sell this 1.95 crore car for a capital loss of Rs 1.30 crore . So he does not pay any GST on the resale amount of Rs 65 lakhs as he has suffered a capital loss.

If a broker sells this car and charges commission/ brokerage of say 2 % viz. Rs 1.30 Lakh, the broker pays GST (new rates) on his profit of Rs 1.3 L as applicable to a SUV.

Whereas, for classic and vintage cars/ bikes the scenario is different. Suppose a person owning a first owner, showroom condition, 1956 Dodge Kingsway (then cost price was about Rs 30,000=00) resells his car for Rs 12 lakhs (its current price in the resale market). This seller is making a long term capital gain of Rs 11.70 lakhs on its original cost price. He has to pay GST as applicable to large cars as on date, on this capital gain of Rs 11.70 L . Of course, his Chartered Accountant can help him get cost inflation index deductions, as applicable under the law.

So if a car depreciated in value there is no GST payable by owner. If a broker gets his brokerage on such a car he pays GST. For classic/vintage cars/bikes etc it is the difference between buyer's cost price and his selling price, on which GST needs to be paid. Plus if there is any broker involved in the classic/ vintage car/bike sale he shall be liable to pay GST on the brokerage amount.

No, That's not the case. GST is payable on all second-hand cars, 20 Lac FY limit for Individuals not registered under GST, for rest everyone 18 % flat. Please do speak to any CA or second-hand dealership.

Correct, in fact, you can even transfer to your own name ( I assume you have a separate PAN for your partnership firm) and then sell to anyone without GST.

But then, the car ends up having one additional owner which further brings down the sale price (and hence, lowers the profit).

This will work out only when,

Resale price of car with (no. of owners+1) + RTO fees for transfer/documentation > Resale price of car with no. of owners + Tax on profit

I am sure most used luxury cars will be valued at less than 20L, remaining would be transferred in black money :Frustrati

I don't see any of this adding up. Reading this thread after fuel price thread only makes me think we are just being milked for being able to earn, while poor gets everything for free while playing the victim.

@mods: Kindly delete if it's not related to the topic.

I doubt it. Once an item is in the negative list you can't take input credit irrespective of whether it is on RCM.

Under VAT regime in Karnataka, VAT on used cars was 5%. If one was a registered entity under VAT there was no way one could get away with it as authorities would scan your fixed assets schedule. Once an asset is sold they would check whether VAT is paid on it.

I see there are some suggestions to sell the car to one of your family members at a discounted price and then selling it as an individual without GST. Problem with this is, revenue authorities will raise a red flag when you under invoice your car. Secondly when that individual sells and makes a huge profit, you will have to shell out Income Tax @ 30% (if that individual is under that bracket). There is no escaping tax!

Few points:

A. GST is not Applicable on sale of used car by Non business entities say a salaried individual. Even if a used car is bought by a business reverse charge mechanism (RCM) is not applicable. This is not just because RCM is currently in abeyance. Even if it’s becomes effective from April such transaction will not attract RCM because it’s not “in furtherance of business”.

B. GST whether paid on purchase or under RCM is about allowed as input. Unless the vehicle is used for lease/hire.

C. All other costs relating to the vehicle on which GST is paid can be claimed as input credit. e.g. Spares, maintenance, insurance etc.

D. For dealers in used cars the option of paying on the margin is available e.g. you buy a used car for 3 Lakhs and sell it for 3.5 Lakhs. You pay 18%/12% on the margin.

E. That leaves the guys who use the cars as “fixed assets” in the business and claim depreciation on them. Variety of discussions of this possible. But broadly the view is GST won’t be applicable. The arguments supporting this are multiple a. Not Applicable if sold for less than purchase value. b. Not in furtherance of business et al.

F. For the “tax planning” of selling to individual under invoiced and then a full sale. Here’s what could go wrong 1. Under GST being a non arms length transaction the valuation could be questioned. 2. Under Income tax the buyer could Have a tax liability for acquiring an asset at below it’s fair value.

I have bought two cars from Mahindra First Choice in Delhi in the past three years and I have recently been in negotiations with them for another car. I also sold or traded in one car with them. In all cases, they have kept it as an individual to individual sale. They have taken blank signed forms and put in the name of the buyer at the time of sale. My suspicion is that they even undercut MFC on whatever percentage the are supposed to pay by unofficially selling many cars in this manner. I suspect this as they don't offer the usual 6 months MFC warranty and refuse to show certification or inspection report claiming it to be confidential.

Having said that, both cars were great vehicles with no problems whatsoever.

My company has a corporate car policy wherein they provide a new car to me but it is registered in the name of the company. At the end of 5 years I have to mandatorily transfer the car to my name. I do not have the option of selling the car without transferring the car to my name first.

On this first I have to a pay a perquisite tax (because it is a perk given by my company to me) and then I have to pay GST (because it is a company selling/transferring the car to an individual).

So then, I first pay 33% perquisite tax on the IDV and then I pay a further 18% GST on the transfer value?

Am I reading the GST bit correct?

You can ask/ request your company to bear GST or see if they can reduce the price appropriately. If that does not happen, I am afraid, you will need to bear 18 % GST on sale value.

You mention that you have to pay 33% perk tax on IDV which you may need to check. Below is the link to Income tax department's information on benefits provided to salaried person.
http://www.incometaxindia.gov.in/Cha...rson_Final.htm

Please read Notes section : 1. Motor Car (taxable only in case of specified employees [See note 4]) except when car owned by the employee is used by him or members of his household wholly for personal purposes and for which reimbursement is made by the employer) and pick one sub-section that applies to your case. I don't see any case that refers to perk tax applied on IDV.