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Uttam (employee)     07 September 2019

Repossession of New cars from registered defaulters by Banks

I understand the repossession of cars from unregistered persons is covered in rule 35 of valuation.

And the notification 8/2018 is for old and used cars.

what has to be done when the new cars are repossessed from registered car dealers by Bank ?


 32 Replies

Sandarsh M

Sandarsh M   07 September 2019

I think you can cover it under Rule 35 instead of proviso which deals with unregn person
Uttam

Uttam (employee)     07 September 2019

Rule 35 is about second hand goods. I doubt we can cover new vehicles recovered in that rule.
1 Like
Sandarsh M

Sandarsh M   07 September 2019

only that rule looks valid for this query. it's talking about regn persons who can purchase goods.

You can try interpretation of that rule.
Uttam

Uttam (employee)     07 September 2019

but that rule is for second hand goods we cannot take the interpretation of new cars which were never sold after registration to customers. would be tough to fit in that rule.
1 Like
Dasarath singh Rajpurohit

Dasarath singh Rajpurohit   07 September 2019

as you rightly said it is for second hand goods dealers, whereas the goods sold by original manufacturer to dealer could be treated as first sale and repossession could be treated as second hand sale.

in my view you can take this interpretation and try using the said rule
Uttam

Uttam (employee)     07 September 2019

I agree there is sale happening between original manufacturing and dealer in first place. But the intention of the rule doesnot look like to cover this transaction.

if we forcely interpret and fit for our benefit then there be negative consequences for this later. that's the fear.
1 Like
Dasarath singh Rajpurohit

Dasarath singh Rajpurohit   07 September 2019

But if we take this interpretation keeping the future litigation aside, the credit availed by the defaulter is gone and the bank would anyways cannot take full credit or 50%.

There might be litigation but for such default depart is required to catch such defaulter and collect gst and not bank
Uttam

Uttam (employee)     07 September 2019

That's the challenge in this transaction. Dept is loosing the credit after the banks repossess and the chain is getting broke.

Seems there is no solution for this. How an AAR can help here.?
Dasarath singh Rajpurohit

Dasarath singh Rajpurohit   07 September 2019

Usually all the AAR are negative and not in favour of asseessee. Dont know how the bank would take it up.

If it is negative its going to be a big hit for all repossession cases.
Uttam

Uttam (employee)     07 September 2019

even that's true.

the pain here Notification 8/2018 is also not of any use in this situation
Dasarath singh Rajpurohit

Dasarath singh Rajpurohit   07 September 2019

even as per that notification also if you can interpret the word "old and used cars" then there might be some way out.
Uttam

Uttam (employee)     07 September 2019

There is no definition in the GST Act and also nothing in Customs Tarriff act which we refer for descripttions.

So taking reference from Motors vehicle act could be of some use in this to draw support in this situation
Dasarath singh Rajpurohit

Dasarath singh Rajpurohit   07 September 2019

not aware of motor vehicles act. you gotta search and fit.
Uttam

Uttam (employee)     07 September 2019

thanks for your insights.

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