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Car Leasing: GST and Interest cost

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This query is : Resolved

Ashish Kothari (Querist)
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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)
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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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