Vat in punjab on used car

This query is : Resolved

parvinder singh (Querist)
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12 October 2011
Recently there is amendment in relation to used car where by every dealer has to pay tax on used car for ist first sale at the rate of Rs 3000 or 5000 depending upon Cc of the car.

MY question is

Is this amendement applicable to Ltd companies if they sold their car.(not in the business of buying or selling the car)

On enquiry from VAT Cell at patiala they told us Every persons who sell the car are liable to pay the tax.

But so far as notification is concerned every dealer is liable to pay the tax and dealer is not defined under the Punjab Act however defined under the CST Act and person who is in the business of buying and selling the goods or his agent is primarly can considered a dealer.

moreover ITC is also not available when a company buy a car.Then how can company liable to pay the tax if he is not in a business to buy or sell the car.

The relevant notification and defination under CST Act is given.

Please share your opinion in the matter.

In the said schedule ‘E’, after serial No.9, and the entries relating thereto the following shall be added, namely:-

‘’10 (a) Pre-owned cars having engine Rs.3000/- per car on the first
Capacity not exceeding 1000cc. sale, by a dealer
liable to pay
tax under this Act.

(b) Pre-owned cars having engine Rs.5000/- per car on the first
Capacity exceeding 1000cc. sale, by a dealer
liable to pay tax
under this Act.”

KARAN BIR SINGH SIDHU
Financial Commissioner, Taxation and
Secretary to Government of Punjab,
Department of Excise and Taxation.

Dealer under CST Act

[(b) "dealer" means any person who carries on (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods, directly or indirectly, for cash or for deferred payment, or for commission, remuneration or other valuable consideration, and includes-

(i) a local authority, a body corporate, a company, any co-operative society or other society, club, firm, Hindu undivided family or other association of persons which carries on such business ;

(ii) a factor, broker, commission agent, del credere agent, or any other mercantile agent, by whatever name called, and whether of the same description as hereinbefore mentioned or not, who carries on the business of buying, selling, supplying or distributing goods belonging to any principal whether disclosed or not; and

(iii) an auctioneer who carries on the business of selling or auctioning goods belonging to any principal, whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal.

Explanation 1: Every person who acts as an agent, in any State, of a dealer residing outside that State and buys, sells, supplies, or distributes, goods in the State or acts on behalf of such dealer as-

(i) a mercantile agent as defined in the Sale of Goods Act, 1930 (3 of 1930), or

(ii) an agent for handling of goods or documents of title relating to goods, or

(iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment,

and every local branch or office in a State of a firm registered outside that State or a company or other body corporate, the principal office or headquarters whereof is outside that State, shall be deemed to be a dealer for the purposes of this Act.

Explanation 2: A Government which, whether or not in the course of business, buys, sells, supplies or distributes, goods, directly or otherwise, for cash or for deferred payment or for commission, remuneration or other valuable consideration, shall, except in relation to any sale, supply or distribution of surplus, un-serviceable or old stores or materials or waste products or obsolete or discarded machinery or parts or accessories thereof, be deemed to be a dealer for the purposes of this Act;]

Regards

CA parvinder Singh

parvinder singh

parvinder singh (Querist)
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17 October 2011 Dear Co Members

Please respond

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Here's a detailed analysis of your query regarding **VAT on used cars in Punjab**, especially about the liability of **limited companies** selling their own cars (not dealers):

---

### Background

Punjab introduced an amendment imposing a **fixed tax on the first sale of pre-owned cars** by a dealer:

* Rs. 3000 for cars with engine capacity up to 1000cc
* Rs. 5000 for cars with engine capacity above 1000cc

This tax is payable **only by a dealer** on the first sale under the Punjab VAT Act.

---

### Who is a "Dealer"?

Under the Punjab VAT Act (and also per CST Act definition), a **dealer** means:

* Any person or entity (including companies) engaged in the **business of buying, selling, supplying, or distributing goods** (whether regularly or otherwise) for cash or deferred payment or any commission/remuneration.

* This includes companies, partnerships, agencies, mercantile agents, etc., who carry on such business.

* Also includes branches of companies located in the state whose head office is outside the state.

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### Your Query

* **Company selling its own used car:**
The company is **not in the business of buying/selling used cars**, the sale is a **one-time disposal of its own asset**.

* According to your VAT Cell enquiry, every person selling a car must pay this tax, but the legal notification states tax liability is on the **dealer**.

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### Interpretation & Opinion

1. **If the company is NOT in the business of trading used cars:**

* It is selling its own asset and NOT acting as a dealer.
* The company should **not be liable to pay this fixed tax**, as the tax is on "dealers" only.
* The company is exempt from this fixed tax on used car sale because it is a **non-dealer, occasional sale**.

2. **If the company is a dealer or regularly buys and sells used cars:**

* The company is liable to pay the fixed tax as per notification.

3. **Input Tax Credit (ITC):**

* Since the company buying the car is not for resale, ITC is not available on the purchase of car, so this does not impact the liability on sale.

4. **Legal position:**

* Notification specifically mentions **dealers** only.
* The term dealer is defined and limited to persons carrying on the business of buying/selling goods.
* Sale of company’s own used car is not business activity of buying/selling used cars, so it is not covered.

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### Summary

* The **fixed tax on used cars applies only to dealers** as defined under the Punjab VAT Act.
* If a company sells its own car (and is not in the business of used car trading), **it is not liable to pay the fixed tax**.
* This position aligns with the legal text and common interpretation.

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### Recommendation

* Keep documentation showing the car was a company asset and sale was a one-time disposal.
* If Punjab VAT department insists otherwise, seek clarification in writing or consult a tax lawyer for formal opinion.
* Monitor any further notifications or circulars clarifying the issue.

---

If you want, I can help draft a formal letter or representation based on this view. Would you like that?

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