Sale of motor car

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Prince (Querist)
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03 January 2015 I HAVE SOLD MY MOTOR CAR & PURCHASED THE NEW CAR ON WHICH DEPRECIATION WAS CLAIMED BY ME. CAR WAS USED IN THE BUSINESS. MY QUERY IS DO I NEED TO PAY VAT TO THE SALE TAX DEPARTMENT ON THE SALE PROCEEDS OF THE SOLD CAR AND IF YES PLZ EXPLAIN & AT WHAT RATE THE VAT AMT IS TO BE PAID?

shivaji prasad bhimavarapu

shivaji prasad bhimavarapu (Expert)
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04 January 2015 No VAT on sale of 2nd hand car and other capital assets used in business if no input credit taken. [Anand Decors vs. Commissioner Trade & Taxes, High Court Delhi]
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Prince

Prince (Querist)
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04 January 2015 thnku for the reply but the case law which you mentioned is applicable in delhi & not in mumbai i guess. As per delhi vat there is no vat liablity on sale of business car. but as per mvat i have heard from many but not sure there is a vat liabilty. plz clear my confusion.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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22 July 2025 Got it! You’re concerned about **VAT liability on sale of a business motor car in Maharashtra (MVAT),** especially since depreciation was claimed.

Here’s a clear summary for your situation under **Maharashtra VAT (MVAT):**

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### VAT on Sale of Used Motor Car (Business Asset) in Maharashtra

1. **If Input Tax Credit (ITC) was claimed on purchase of the car:**

* Sale of such capital asset (like a motor car) is **treated as a sale under VAT**.
* You are **liable to pay VAT** on the sale proceeds.
* VAT rate depends on the type of vehicle (usually around 12.5% under MVAT on motor vehicles).
* You must **reverse the proportionate input tax credit** if applicable, and pay VAT on the sale value.

2. **If no ITC was claimed on the purchase:**

* Generally, **no VAT liability arises on sale of such used assets.**
* The sale is treated as **transfer of capital asset**, not sale of goods under VAT.

3. **Depreciation claim under Income Tax is separate and does not affect VAT liability.**

* Even if you claimed depreciation, VAT depends solely on whether you claimed input tax credit on the purchase.

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### Practical steps you should do:

* **Check your purchase invoices:** Did you claim input VAT credit when you bought the car?
* If **Yes**, you need to pay VAT on the sale.
* If **No**, likely no VAT is payable on the sale under MVAT.

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### Note:

* MVAT laws can have specific provisions, and enforcement varies.
* You may want to consult a local tax consultant or MVAT department for confirmation.

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If you want, I can help draft a letter/email you can send to your tax consultant or local VAT officer to get written clarity on this! Would you like that?

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