GST on disposal of fixed assets

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Bharat (Querist)
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17 October 2019 I am accountant in a pvt ltd co. We want to dispose an fixed asset motor car cc 1582 which was purchased before GST.
I want to know GST rate applicable, and whether GST applicable of sale value less WDV OR state away on sale value.
I would also like to know if tax invoice needed for this transaction.

CA Dileep Surya Kumar

CA Dileep Surya Kumar (Expert)
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17 October 2019 if no credit was taken then Sale value - WDV

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Bharat

Bharat (Querist)
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18 October 2019 Thank you Sir, will there be need to prepare tax invoice or only receipt and journal entry suffice to account it. Awaiting

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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27 July 2024 When disposing of fixed assets, such as a motor car, under GST, there are several key considerations. Let’s break down the details for your situation:

### 1. **GST Rate on Disposal of Fixed Assets**

**Applicable GST Rate:**
- For the sale of a motor car, the applicable GST rate is 18%. This rate is applicable whether the asset was purchased before or after the implementation of GST.

### 2. **GST Calculation on Disposal**

**Calculation Basis:**
- **Sale Value Basis:** GST is generally applicable on the sale value of the asset. The sale value is the total consideration received from the sale of the asset.
- **Depreciation Adjustment:** GST is not calculated on the difference between the sale value and the Written Down Value (WDV). It is applied on the entire sale value of the asset.

**Example Calculation:**
- **Sale Value of Motor Car:** ₹5,00,000
- **GST @ 18%:** ₹90,000
- **Total Invoice Value:** ₹5,90,000

### 3. **Tax Invoice Requirement**

**Invoice Necessity:**
- **Tax Invoice Required:** You must issue a tax invoice for the sale of the motor car. A tax invoice is required to comply with GST regulations and to ensure that the GST paid on the sale can be properly accounted for.

### 4. **Accounting Entries**

**Accounting for the Sale:**
- **Receipt and Journal Entry:** While a receipt alone is not sufficient for GST compliance, proper accounting entries and a tax invoice are essential.

**Journal Entry Example:**
- **Debit**: Bank Account ₹5,00,000
- **Debit**: GST Output Liability ₹90,000
- **Credit**: Fixed Asset (Motor Car) ₹5,00,000 (or WDV as per books)
- **Credit**: Sale of Asset ₹5,00,000

### Summary

1. **GST Rate:** 18% on the sale value of the motor car.
2. **GST Calculation:** Based on the entire sale value, not the difference between sale value and WDV.
3. **Invoice Requirement:** A tax invoice is necessary to comply with GST regulations.
4. **Accounting:** Issue a tax invoice and record the transaction with appropriate accounting entries.

For accurate compliance, always consult a tax professional or GST consultant, especially if there are specific nuances or complexities in your situation. This will ensure that all GST obligations are met correctly and efficiently.

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