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SALE TAX ON 2nd HAND SALE OF CAR

NITIN JAIN (ACCOUNTANT) (34 Points)

28 April 2010

HAI I AM NITIN LIVING IN CHATTISGARH STATE,

I WANT TO KNOW THAT WHETHER THEIR IS ANY SALE TAX LIABILITY ON SALE OF 2nd HAND MOTOR CAR ( PURCHASED INSIDE THE STATE).

IF POSSIBLE KINDLY SEND ME NOTIFICATION FOR THE SAME.

ITS URGENT WAITING FOR EARLY REPLY.

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9 Replies

Ram Avtar Singh (Nagari Sultanpur U.P.Delhi) (14477 Points)
Replied 28 April 2010

Second-Hand Goods

Second-hand goods are goods previously used by you or someone else.

The standard rules apply to transactions in second-hand goods between registered dealers. You will need to charge tax if you sell second-hand goods as part of your turnover, and will be entitled to claim tax credits for any DVAT paid on the purchase of second-hand goods.

Where the person from whom you bought the second-hand goods may not be registered (e.g. a private person selling his motor car to a registered dealer), there will be no tax charged and no tax invoice issued to you for the sale.

The law allows you to claim an input tax credit in such cases, provided:

You, as a registered dealer, sell second-hand goods;
You purchased the goods from a resident seller who is not registered for DVAT;
You have adequate proof of the amount paid for the goods;
The goods were purchased as stock for resale in the same form, or as raw materials for other goods; and
The sale of the goods, or the goods into which they were incorporated, is liable to DVAT.

If you meet these conditions, the amount of the input tax credit allowable will be the least of:

The input tax on the original cost of the goods when bought by the seller;
The tax fraction (i.e., tax rate/(100+tax rate)) of the original cost of the goods to the seller;
The tax fraction of the fair market value of the goods at the time of purchase of the goods by you; and
The tax fraction of the consideration paid by you to the seller.

The tax credit can normally be claimed when you buy the second-hand goods. However, if the amount paid for the second-hand goods is more than Rs. 2,000, the input tax credit will be allowed only in the tax period when the goods are resold.

The following example illustrates the calculation of the input tax credit for second-hand goods:

Example

Arun is a registered dealer in Delhi. In December 2005, he purchases an item X from Navin for Rs 80,000. Navin had purchased the same item for Rs 100,000 plus DVAT of Rs 12,500 in April 2005. Let us assume that the Fair market Value of the item X was Rs 90,000. No tax is charged by Navin as he is an unregistered dealer. The tax rate applicable to item X at the time of sale is 12.5%.

Input Tax Credit available to Arun would be least of the following: (in Rs)

Input tax borne by Navin when he purchased the item	12,500
Tax fraction of the original cost of item X (12.5/112.5 x 112,500)	12,500
Tax Fraction of the Fair Market Value of item X (12.5/112.5 x 90,000)	10,000
Tax Fraction of the amount paid by Arun (12.5/112.5 x 80,000)	8,889

3 Like

Narender Singh (Accountant) (21 Points)
Replied 05 April 2012

HAI I AM NARENDER SINGH LIVING IN DELHI STATE, I WANT TO KNOW THAT WHETHER THEIR IS ANY SALE TAX LIABILITY ON SALE OF 2nd HAND MOTOR CAR IF POSSIBLE KINDLY SEND ME NOTIFICATION FOR THE SAME. ITS URGENT WAITING FOR EARLY REPLY

Ram Avtar Singh (Nagari Sultanpur U.P.Delhi) (14477 Points)
Replied 21 April 2012

For any Industy registered in Trade & tax Department to be pay Vat on Sale of Old Car/ Scrap.

Ram Avtar Singh (Nagari Sultanpur U.P.Delhi) (14477 Points)
Replied 26 June 2016

Now court case no Vat on Used car , please find attached

Attached File : 12465 20160626160007 no vat on used car dvat.pdf downloaded: 1175 times

Sudipta Kumar Roy (1 Points)
Replied 06 August 2016

Dear Sir,

I purchased an item from amazon USA. I want to sell on ebay now after one year of usage.

Do I have to pay sales tax.

Regards

sudipta

Ram Avtar Singh (Nagari Sultanpur U.P.Delhi) (14477 Points)
Replied 06 August 2016

Dear sir,

your are Individual or company. if individual then no need to pay any Tax. if your are company then first see your Items as per you state vat rule.

Ram Avtar Singh (Nagari Sultanpur U.P.Delhi) (14477 Points)
Replied 06 August 2016

Dear sir,

your are Individual or company. if individual then no need to pay any Tax. if your are company then first see your Items as per your state vat rule.

Ajay Gaur (Article) (22 Points)
Replied 17 July 2017

Dear Sir,

I am an registered dealer of used car. Can i claim input credit in case of scrap car.

Regards,

Ajay

Harsh Nanda (2 Points)
Replied 30 September 2017

Dear Sir,

Please update ,sale tax is applicable for any sale of used/scound hand motorcycle,scootors . if not then we are consider these sale as tax free in returns .and also share if any jujdment regarding puchase or sale of used/scound hand motorcyle ,bikes, scootors