Dealer of second hand bikes

This query is : Resolved

CA Ashish Gupta (Querist)
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14 August 2015 The first hand price of a bike is Rs. 150,000. Mr. X purchased this bike at 150, 000+ VAT. After one year Mr. X sold the bike for Rs. 80,000 to Mr. A. Mr. A is a trader dealing in second hand bikes. Mr. A sold the purchased bike from Mr. X to Mr. B for Rs. 125,000 after incurring an expense of Rs. 20,000. Now Mr. B is demanding for a VAT bill from Mr.A. In such case is Mr. A liable to issue VAT bill to Mr. B. Please clarify ur answer with appropriate supporting.
And also what if Mr. A is not a registered VAT dealer although his annual turnover is beyond the mentioned threshold of VAT.

CA Ashish Gupta

CA Ashish Gupta (Querist)
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15 August 2015 Any one please Answer.

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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20 July 2024 In the scenario described, let's address the liability of Mr. A (the trader dealing in second-hand bikes) to issue a VAT bill to Mr. B (the buyer of the bike from Mr. A), considering Mr. A's VAT registration status and the nature of the transaction.

### 1. Liability to Issue VAT Bill

#### VAT Liability for Registered Dealer (Mr. A is registered for VAT):

- **Sale by Mr. A to Mr. B**: Mr. A sold the bike to Mr. B for Rs. 125,000 after incurring an expense of Rs. 20,000.

- **VAT Application**: Since Mr. A is a registered VAT dealer and he sold the bike to Mr. B as part of his business activities, he is required to issue a VAT invoice to Mr. B.

- **VAT Calculation**: The VAT invoice will include VAT charged on the sale price of Rs. 125,000. VAT is typically calculated as a percentage of the sale price, and the exact rate can depend on the VAT laws applicable in the jurisdiction where the transaction occurs.

- **Supporting VAT Registration**: Mr. A should provide Mr. B with a VAT invoice that includes his VAT registration number, details of the transaction (including the sale price and VAT amount charged), and other required information under VAT regulations.

#### VAT Liability for Unregistered Dealer (Mr. A is not registered for VAT):

- **Threshold Consideration**: If Mr. A's annual turnover is beyond the threshold where VAT registration is mandatory, but he is not registered for VAT, he would be considered an unregistered dealer.

- **Impact on Transaction**: As an unregistered dealer, Mr. A cannot charge VAT on the sale to Mr. B. Therefore, he would not issue a VAT invoice to Mr. B.

- **Legal Implications**: It's important for Mr. A to comply with the VAT regulations of the jurisdiction. Selling without VAT registration when required can lead to penalties and legal consequences.

### Conclusion

- **Registered VAT Dealer (Mr. A is registered)**: Mr. A is liable to issue a VAT invoice to Mr. B for the sale of the bike if he is registered for VAT, which includes charging VAT on the sale price.

- **Unregistered VAT Dealer (Mr. A is not registered)**: If Mr. A is not registered for VAT despite being required to, he cannot issue a VAT invoice to Mr. B, and the sale would be without VAT.

It's crucial for Mr. A to determine his VAT registration status correctly based on his turnover and comply with the VAT laws applicable in his jurisdiction to avoid any legal issues or penalties.

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