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GST on sale of Moter car

Saket Mishra (in 12th class) (111 Points)

28 January 2020

What will be the taxability under GST if i sale my Car in which i had not taken ITC, since it is blocked credit,
should i pay gst on sale proceed of car ??

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7 Replies

Anup Agarwal (1184 Points)
Replied 28 January 2020

No.
As per Schedule-I if asset is permanently transferred and ITC was taken on the same at the time of acquisition of such asset, then it shall be treated as deemed supply.

in your case, you didn't claim ITC at the time of acquisition of car, hence on sale of car GST shall not be charged.

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Saket Mishra (in 12th class) (111 Points)
Replied 28 January 2020

But there is confusion since sec 18 tells that at time of sale of capital asset we should pay tax..

Anup Agarwal (1184 Points)
Replied 28 January 2020

If you have claimed ITC at the time of acquisition.

If it will out from definition of 'supply' mentioned in Section 7 read with schedule-I, then no question of payment of tax.
bcoz...No supply, no chargeablity of tax.

Saket Mishra (in 12th class) (111 Points)
Replied 28 January 2020

And secondly schedule I only deals with transaction which is made without consideration.
but in my case i am selling car for consideration.

Anup Agarwal (1184 Points)
Replied 28 January 2020

Dear Saket,
There is also written "Where input tax has been availed"

as per section 18, ITC shall be reversed, but if ITC was not claimed, then how will you reverse?

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Saket Mishra (in 12th class) (111 Points)
Replied 28 January 2020

Yes you are right but schedule I only be activated when transaction is done without consideration.

Anup Agarwal (1184 Points)
Replied 28 January 2020

As per section 7 (1) (a) of the CGST Act, all forms of supply of goods like sale, transfer etc made for a consideration by a person in the course of business or furtherance of business are a “Supply”:-

7. (1) For the purposes of this Act, the expression “supply” includes––

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

2. Term “Business” is defined in section 2 (17) of the CGST Act whereby sub clause (a) and (b) thereof is relevant for this discussion. It says that any trade or commerce done with or without intent of profit or any activity incidental or ancillary to such trade or commerce will be termed as BUSINESS.

2 (17) “business” includes––

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;

(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);

(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;

(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;

(e) provision by a club, association, society, or any such body (for a subscripttion or any other consideration) of the facilities or benefits to its members;

(f) admission, for a consideration, of persons to any premises;

(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;

(h) services provided by a race club by way of totalisator or a licence to book maker in such club ; and

(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;

3. Selling a used car by a company which is essentially into the business of goods other than cars cannot therefore be termed as a transaction done “in the course of business or in furtherance of business”, therefore on this count it won’t be a SUPPLY and hence cannot be a taxable supply. This very issue has been tested in the courts including the Supreme Court of India in many cases under the VAT regime. Under majority of the judgments, courts have said that sale of goods can be brought to tax only if done with an intention of doing business in those goods and not otherwise. In the case of Panacea Biotech Ltd. the issue was taxability of sale of used car under Delhi VAT and whether the same was covered in the definition of “business”. Hon’ble Delhi High court in this case has held that the same will not be regarded as sale ‘in connection with or incidental or ancillary to’ business and hence shall not be taxable.

4. Accordingly, in my opinion as per the test laid out in section 7 (1)(a) of the CGST Act, transaction of selling goods capitalized in the books of accounts will not be a “Supply” and therefore will be not taxable under section 9 of the said act.