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Car Leasing: GST and Interest cost

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This query is : Resolved

Ashish Kothari (Querist)

07 January 2021 An Employee (Ee) avails a company leased car from Employer (Er) through its appointed car leasing company (Clc). Clc leases the car for 4 years with a residual value of 20%. Clc claims input tax credit on the total purchase price P of a car, where the total purchase price P = (Ex-showroom+Regn+Other charges = B) + GST. Clc leases the car at a monthly lease of X = Principal (P) + Interest (I) + GST on lease as applicable.

The question is: Whether I is calculated on P or B at start of the term? Since ITC is claimed on P, then B is the value of the leased car, hence it seems logical that I should be calculated on B. Please clarify the rationale either way.

Lekhraj sood

Lekhraj sood (Expert)

07 January 2021 It depends on the policy of the leasing company. They may finance the on road price or ex-showroom price. Interest is calculated on the value financed - it can be P or B as agreed .

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