used car dealer tax attration

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john (Querist)
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03 May 2010 mr.x is dealing in both new and used car, plz provide me with the taxes attracted by his business. thank you

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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04 May 2010 In the purview of Income tax it is Income from Business only. but let me know what exactly you required

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john

john (Querist)
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04 May 2010 if Mr.x purchases & sales used & new cars, apart from incometax will his business be attracted by SERVICE TAX & MVAT also

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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02 August 2025 Here’s a quick summary of tax implications for Mr. X, who deals in both **new and used cars**:

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### 1. **Income Tax**

* Income from sale of cars (both new and used) is treated as **Income from Business or Profession**.
* Mr. X should maintain proper books of account and declare profits accordingly.

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### 2. **Service Tax**

* **Sale of cars** is generally considered a sale of goods, not a service, so **no service tax on sale of cars**.
* However, if Mr. X provides any **taxable services** (like repair, maintenance, commission agent services, or car rental), **service tax may be applicable on those services**.

---

### 3. **MVAT (State VAT or GST)**

* **VAT or GST is applicable on sale of cars**, both new and used.
* For used cars, VAT/GST is charged on the **sale price**.
* VAT rates depend on the state; earlier it was MVAT, now replaced by GST.
* GST on cars currently varies (e.g., 18% or 28% depending on car category).

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### 4. **Other Taxes**

* **Excise Duty:** Not applicable on cars as they are finished goods.
* **Custom Duty:** Applicable if importing vehicles.
* **Other Local Taxes:** Like road tax, registration charges.

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### Summary Table:

| Tax Type | Applicability on New Cars | Applicability on Used Cars |
| ------------ | ----------------------------------- | -------------------------------- |
| Income Tax | Business Income | Business Income |
| Service Tax | Only on services provided, not sale | Same as new cars (services only) |
| MVAT/GST | Applicable on sale | Applicable on sale |
| Excise Duty | Not applicable | Not applicable |
| Customs Duty | If imported | If imported |

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**Note:** With the introduction of GST (Goods and Services Tax), service tax and VAT/MVAT have been subsumed under GST since July 2017.

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If you want, I can provide a more detailed explanation with applicable GST slabs or help draft compliance checklists.

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