TNVAT on Scrapping of Vehicle
This query is : Resolved
15 June 2009
Dear experts,
If a company ABC Ltd sells a Vehicle (their Fixed Asset), will VAT be applicable on that sale? Please explain me in this regard.Will the Sale be treated as a sale of scrap?
Thanking you,
Vyshak
If a company ABC Ltd sells a Vehicle (their Fixed Asset), will VAT be applicable on that sale? Please explain me in this regard.Will the Sale be treated as a sale of scrap?
Thanking you,
Vyshak
Madhukar N Hiregange
(Expert)
17 June 2009
If it is really a scrap then it can be sold as iron & steel scrpa @ 4% on the sale price.
17 June 2009
Dear experts,
If a company ABC Ltd sells a Vehicle (their Fixed Asset), will VAT be applicable on that sale? Please explain me in this regard.Will the Sale be treated as a sale of scrap?
Thanking you,
Vyshak
If a company ABC Ltd sells a Vehicle (their Fixed Asset), will VAT be applicable on that sale? Please explain me in this regard.Will the Sale be treated as a sale of scrap?
Thanking you,
Vyshak
02 August 2025
Regarding your query on **TNVAT applicability on sale of a vehicle (fixed asset) by a company**:
---
### 1. **Is VAT applicable on sale of vehicle (fixed asset)?**
* Yes, **VAT is applicable** when a company sells a vehicle which is part of its fixed assets.
* This transaction is considered as **sale of goods** under the VAT Act.
* The applicable VAT rate depends on whether the vehicle is sold as a **used vehicle** or as **scrap**.
---
### 2. **Is the sale treated as sale of scrap?**
* It depends on the condition and the nature of sale:
* If the vehicle is **sold as a running vehicle** or a **used vehicle for further use**, VAT is charged at the **standard rate applicable to motor vehicles**.
* If the vehicle is **sold as scrap** (i.e., sold for parts or metal salvage only), then it is treated as sale of **scrap** or **scrap metal**.
* The VAT on scrap metal is charged at a **concessional rate**, generally **4%** under TNVAT for iron and steel scrap.
---
### 3. **How to determine whether sale is scrap or vehicle?**
* If the vehicle is **no longer fit for use and sold only for its metal content or parts**, it qualifies as **scrap**.
* If the vehicle is **saleable as a running vehicle** or for use, it is treated as **sale of vehicle**, attracting normal VAT.
---
### 4. **Practical Points:**
* Invoice should clearly mention whether the sale is for a running vehicle or scrap.
* VAT calculation should be done accordingly.
* Sale of fixed assets is considered a taxable event under VAT law.
---
### Summary:
| Condition | Nature of Sale | VAT Rate |
| ---------------------- | ------------------- | ------------------------ |
| Used vehicle (running) | Sale of vehicle | Standard VAT on vehicles |
| Vehicle sold as scrap | Sale of scrap metal | Concessional rate (4%) |
---
---
### 1. **Is VAT applicable on sale of vehicle (fixed asset)?**
* Yes, **VAT is applicable** when a company sells a vehicle which is part of its fixed assets.
* This transaction is considered as **sale of goods** under the VAT Act.
* The applicable VAT rate depends on whether the vehicle is sold as a **used vehicle** or as **scrap**.
---
### 2. **Is the sale treated as sale of scrap?**
* It depends on the condition and the nature of sale:
* If the vehicle is **sold as a running vehicle** or a **used vehicle for further use**, VAT is charged at the **standard rate applicable to motor vehicles**.
* If the vehicle is **sold as scrap** (i.e., sold for parts or metal salvage only), then it is treated as sale of **scrap** or **scrap metal**.
* The VAT on scrap metal is charged at a **concessional rate**, generally **4%** under TNVAT for iron and steel scrap.
---
### 3. **How to determine whether sale is scrap or vehicle?**
* If the vehicle is **no longer fit for use and sold only for its metal content or parts**, it qualifies as **scrap**.
* If the vehicle is **saleable as a running vehicle** or for use, it is treated as **sale of vehicle**, attracting normal VAT.
---
### 4. **Practical Points:**
* Invoice should clearly mention whether the sale is for a running vehicle or scrap.
* VAT calculation should be done accordingly.
* Sale of fixed assets is considered a taxable event under VAT law.
---
### Summary:
| Condition | Nature of Sale | VAT Rate |
| ---------------------- | ------------------- | ------------------------ |
| Used vehicle (running) | Sale of vehicle | Standard VAT on vehicles |
| Vehicle sold as scrap | Sale of scrap metal | Concessional rate (4%) |
---
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