Ahmedabad Authority for Advance Ruling: Members Atul Mehta and Arun Richard, has held that 18% GST is payable on value for intended supply on the sale of a car by a company after using it for business purposes.
Factual Background of the case
The applicant purchased a new SUV (i.e., sports utility vehicle) for Rs. 80 Lakhs on 16-02-2018 for use in its business. It did not use GST Input Tax Credit at the time of purchase as it is restricted under Section 17(5) of the Central Goods and Services Tax Act, 2017 (CGST Act). The depreciation on the car was claimed under the Income Tax Act, 1961. The Applicant intends to sell the used car for Rs 55,00,000/-. The written down value of the car as per books of accounts is Rs 47,00,000/-.
An application was filed by the applicant, under Section 97(2) of the CGST Act before the Ahmedabad Authority for Advance Ruling to seek an Advance Ruling on the following:
- At what rate of GST, the new car purchased by the company is sold after using it for business purposes, shall the GST be charged?
- Whether the value of the old and used car, sold by the company as mentioned above, can be taken as the value that represents the margin of the supplier, on the supply of such car, and whether the GST can be charged on such margin?
- The value that represents the margin of the supplier, on supply of such old and used goods/Car will be inclusive of GST or exclusive?
Decision and Analysis
The bench opined that concerning the submissions made on behalf of the applicant, the used car falls under the category of Serial No. 3 of the Notification 8/2018- CT dated 25-01-2018.
As per the notification, 9% CGST is payable on old and used motor vehicles of engine capacity exceeding 1500 cc, popularly known as SUVs including utility vehicles. According to the notification, an SUV includes a motor vehicle of length exceeding 4000 mm and having ground clearance of 170 mm. and above.
The relevant part of the notification which forms the subject matter of the case is as follows-
Explanation- for the purpose of this notification –
In case of a registered person who has claimed depreciation under Section 32 of the Income-Tax Act, 1961 (43 of 1961) on the said goods, the value that represents the margin of the supplier shall be the difference between the consideration received for supply of such goods and the depreciated value of such goods on the date of supply, and where the margin of such supply is negative, it shall be ignored.
Hence, the bench applied the abovementioned provisions and held that 18% (9% CGST and 9% SGST) GST shall be levied upon the difference between the consideration received for the supply of the car and the depreciated value of the car on the date of supply i.e., the value intended for supply.
[Dishman Carbogen Amcis Ltd., 2021 SCC OnLine Guj AAR-GST 19, decided on 01-06-2022]