VAT on sale of used old cars

This query is : Resolved 

Querist : Anonymous (Querist) 15 July 2011

We have a maruti True Value Shop under which we sale and purchase used old cars.My seniors say on the sale of old cars there is a amount of VAT percentage to be paid according to the CC of the cars which the state govt has fixed. Lets say 5%on 800CC car, 8% on 1500CC car and so on.
My query is that we pay VAT on the sale of the used old cars but we are not taking any VAT input on the purchase of these cars.Is it the right thing that we are only paying VAT output and not taking any VAT input credit on these sale of old cars. Please clarify.

Thanks in Advance

CA. Ashish Bihani (Expert)
16 July 2011

Firstly, the rate of VAT is same for all cars, subject to state laws.

Paying VAT output without claiming any input credit is right thing. As you purchase used cars from owners, it is obvious that they are not going to charge any VAT. Hence, there arises no question of your claiming input credit.


C A S.S.Agarwal, M.Com.,LL.B, (Expert)
16 July 2011

In your case you cannot take the benefit of set off of input credit for VAT as you are buying the Cars from the individuals and or the persons who are not the manufacturer. For purchase of car you are not getting any Tax invoice. Hence you cannot claim any set off.

I do not think that first you car buying the car and then selling it. If it is so then it is all right. Otherwise you get only the commission on sale of car and Service Tax is applicable to you.

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